At 2 per cent growth a year, an economy doubles in size in just thirty years.
Paul Ormerod
The model of competitive equilibrium which has been discussed so far is set in a timeless environment. People and companies all operate in a world in which there is no future and hence no uncertainty.
environment uncertainty people
The reader might reflect that an awful lot of supposing has to take place in order for the quantity theory of money to be true.
places money order
Many Europeans, while admiring the strength and power of the American economy, undoubtedly feel that the system of social values which prevails in the United States, manifested in the acute problems evident in the inner cities and the level of violent crime, for example, leaves much to be desired.
strength crime example power system
In most Western economies, the general relationship is not in fact between the rate of inflation and the level of unemployment, but between the rate of change of inflation and the rate of change of unemployment.
change
But Adam Smith was a philosopher as well as well as an economist, famous in his time as much for his Theory of Moral Sentiments as for The Wealth of Nations. And as he understood so well, society is more than the sum of its individual parts.
nations wealth thetimes time society
The importance to Smith of the overall set of values in which the economy operates is generally ignored by his followers in the late twentieth century. His economics, based upon individual self-interest, is remembered, but his moral framework is not.
self
The obstacles facing academic economists are formidable, for tenure and professional advancement still depend to a large extent on a willingness to comply with and to work within the tenets of orthodox theory.
work
The study of human societies and economics is of great importance, and it is not the purpose of the book to suggest otherwise. Rather it is to argue that conventional economics offers a very misleading view of how the world actually operates, and that it needs to be replaced.
purpose
Keynes tried to show that market economies could settle in equilibrium states in which the labour market did not clear, and in which the level of unemployment was high. He believed that this was due to a particular example of market failure, developed in his concept of effective demand.
example failure
The second part of the New Right's policy package has been the belief that free-market solutions are always best. It is this latter view which is profoundly mistaken. Markets and profits are crucial, but the pure free-market model itself is deeply flawed.
rights belief
growth
Once the true relationship between inflation and unemployment is understood, with luck and skill, a free lunch is possible.
luck
By any reasonable criteria, the discipline of economics as a whole, in its present state, is sadly lacking.
discipline
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