Home > Uncategorized > The study of economies needs to be fundamentally reworked.

The study of economies needs to be fundamentally reworked.

from Geoff Davies

The study of economies needs to be fundamentally reworked. The dominant approach has been in a pre-scientific state, akin to medicine before Pasteur. It has not even been in a state comparable to Ptolemaic astronomy, which did make usefully quantified predictions of planetary positions in the sky.

We need to return to fundamental questions. What is the nature of an economy? What is the purpose of an economy? How does an economy relate to the larger society and natural world in which it is embedded? In this book a conception is sketched out that can accommodate not only economic phenomena but the social and natural processes with which they are inextricably entwined.

It is urgently necessary that the currently dominant competitive, free market, neoclassical economic mode be replaced, because it is incompatible with living things at every level: philosophical, theoretical and practical. As a result it is destroying our life support system, and many of us with it. The free-market mode persists in part because of fundamental misconceptions of how unfettered markets work. It is a matter of survival that we better understand this and other possible economic systems, and that we find systems that will nurture human and other life. Fortunately, healthy alternatives are available.


  1. Frank Salter
    September 26, 2019 at 2:09 pm

    It is already possible to eliminate neoclassical analysis from the universe of discourse. The major question must be: Why do the opponents of neoclassical analysis fail to discuss quantitative analysis which is NOT invalidated by the quantity calculus? That should be very easy as the number is tiny.

  2. Yoshinori Shiozawa
    September 26, 2019 at 5:59 pm

    I welcome the appearance of this new book. It seems to contain an important message based on deep reflection on economics. In the Introduction Davis warns us:

    Many of the ideas presented here have been around for sometime but the subject has been in some confusion, with a tendency still, among dissenting economists, to think of ‘schools” of thought and promote a ‘pluralist’ approach. Whereas it is laudable to consider a wide range of ideas, rather than the sterile monoculture of mainstream neoclassical economics, the result has still lacked coherence. For example, the recently issued book Rethinking Economics has chapters on Post-Keynesian, Marxist, Austrian, Institutional, Feminist, Behavioural, Complexity, Co-operative and Ecological Economics (Fischer et al., 2017) but little about how the various conceptions related to each other. (Geoff Davis 2019 p.7)

    Davis is more positive than Lars Syll. At least Davis tries to present his theory at his own risk. His stance is clear.

    The study of economies needs ti be fundamentally reworked. (ibid. p.6)

    The starting concept is of a self-organizing system that is far from equilibrium. (ibid. p.7)

    In this bold challenge, we do not know if he is right or wrong. It is possible that he turns out to be wrong in the end. But, even if he is wrong, he contribute to the development of economics. Failed attempts in theory building are our intellectual asset. This kind of bold trials which aim breakthrough are necessary in order to develop a new economics now. Syll is not taking this risk.

  3. Craig
    September 26, 2019 at 6:41 pm

    Heterodox economists have de-bunked the present dominant macro-economic theory. Every present reform movement revolves around money and finance. The paradigm of Debt Only as the sole form and vehicle for the distribution of credit/money has not changed for the entire course of human civilization.

    To paraphrase James Carville’s cogent political statement:


  4. September 26, 2019 at 8:41 pm
    • September 27, 2019 at 10:30 am

      IMHO this is irrelevant. The fundamental problem is still “garbage in, garbage out”, and performance merely needs to be sufficient for the problems being addressed, not to give the impression that mistaken expectations of rationality are feasible.

  5. John deChadenedes
    September 27, 2019 at 6:06 pm

    I think you guys are making this too complicated. The starting point has to be “What is the economy?” and “What is the purpose of the economy?” The economy (in my view) is an interdependent network of knowledge, tradition, relationships, and cultural factors, probably too complex to model effectively. The purpose of the economy (again my view) is to assure every person a life-sustaining share of everything needed for a productive and secure existences. We don’t need better computers to understand this and we don’t need new theories. We need more compassion and clarity of thought.

    • Yoshinori Shiozawa
      September 27, 2019 at 6:53 pm

      John de Chadened
      I admit that you are talking from your good will. If your “purpose of the economy” stands for the aim of economic policy, you are right. Many economists will agree with you. However, economy is a complex entity, as you correctly acknowledge it. To get a right policy requires deep study of the economy, i.e. how it works and when it goes out of control.

      I do not know how you think about communism. Many people call it something like thought of devils, but it started (at least at its start) from good will. It aimed an ideal society where everybody can live safe and sound. However, as you know well, this idea did not realized as great thinkers like Marx, Hilferding, Bucharin, and Lange imagined. Compassion and clear thought may not necessarily lead our economy and society on a good track. This is one of reasons why we need good economics.

    • Craig
      September 27, 2019 at 7:30 pm

      “I think you guys are making this too complicated.”

      This is correct. THE economic problem IS the monetary and financial paradigm. Full stop. Look. Find the point in the economic/productive process where a policy that completely inverts the problematic nature of monetary, financial and hence economic realities we are enforced into….and implement that policy with post haste.

  6. Ken Zimmerman
    October 2, 2019 at 11:26 am

    A question no economist is likely to ask is how we got into the “fix” described by Geoff Davies. I can’t say much about the rest of the world, but I can for the US. In terms of general domestic policy and particularly economic policy the US was still a fully “New Deal” nation in 1960. Not till the Nixon administration did any major legislation become law to challenge this. But these were minor. The real changes began with Reagan’s administration, focused on “open” markets, deregulation, and “freeing” the finance and banking sectors. Reagan, whose motto for foreign policy was “Trust, but Verify,” showed none of that constraint in domestic policies. A few examples. The Economic Recovery Tax Act of 1981 (ERTA) was a major tax cut designed to encourage economic growth. Also known as the “Kemp–Roth Tax Cut.” Included in the act was an across-the-board decrease in federal income tax rates. The top marginal tax rate fell from 70 percent to 50 percent, and the bottom rate dropped from 14 percent to 11 percent. To prevent future bracket creep, the new tax rates were indexed for inflation. ERTA also slashed estate taxes, capital gains taxes, and corporate taxes. Critics of the act claim that it worsened federal budget deficits, while supporters credit it for bolstering the economy during the 1980s. The Garn–St Germain Depository Institutions Act of 1982 (Pub.L. 97–320, H.R. 6267, enacted October 15, 1982) is an Act of Congress that deregulated savings and loan associations and allowed banks to provide adjustable-rate mortgage loans. It is disputed whether the act was a mitigating or contributing factor in the savings and loan crisis of the late 1980s. My view is it was a contributing factor, particularly with savings and loan associations in the South and Midwest. The Gramm–Rudman–Hollings Balanced Budget and Emergency Deficit Control Act of 1985 and the Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987 (both often known as Gramm–Rudman) were the first binding spending constraints on the federal budget. It led to the explosion in Federal debt that plagues us now. This slowed down a bit under the reign of George H.W. Bush but sped up dramatically under Clinton’s presidency. Particularly, the Gramm–Leach–Bliley Act (GLBA), also known as the Financial Services Modernization Act of 1999, (Pub.L. 106–102, 113 Stat. 1338, enacted November 12, 1999), an act of the 106th United States Congress (1999–2001). It repealed part of the Glass–Steagall Act of 1933, removing barriers in the market among banking companies, securities companies and insurance companies that prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company. With the bipartisan passage of the Gramm–Leach–Bliley Act, commercial banks, investment banks, securities firms, and insurance companies could consolidate. Furthermore, it failed to give to the SEC or any other financial regulatory agency the authority to regulate large investment bank holding companies. The legislation was signed into law by President Bill Clinton. It’s been all down hill since 2000 for regulation of any sort, and particularly of banking and financial services and insurance companies. As they say, it was all “up the open market,” “down with regulation.”

    The happenings on the legislative side were partly a result of what I’ll discuss now – the Koch political network and Public Choice theory in economics. The Koch’s project was not simply about training intellectuals for a battle of ideas; it was training operatives to staff the far-flung and purportedly separate, yet intricately connected, institutions funded by the Koch brothers and their now large network of fellow wealthy donors. These included the Cato Institute, the Heritage Foundation, Citizens for a Sound Economy, Americans for Prosperity, FreedomWorks, the Club for Growth, the State Policy Network, the Competitive Enterprise Institute, the Tax Foundation, the Reason Foundation, the Leadership Institute, and more, to say nothing of the Charles Koch Foundation and Koch Industries itself. Others were being hired and trained here to transform legal understanding and practice on matters from health policy to gun rights to public sector employment. Still others were taking what they learned here to advise leading Republicans and their staffs, from Virginia governors to presidential candidates. The current vice president, Mike Pence, a case in point, has worked with many of these organizations over the years and shares their agenda. As do the former Speaker of the US House Paul Ryan and Senate majority leader Mitch McConnell.

    James Buchanan first established his economics institute at the University of Virginia in 1956 and later relocated to George Mason University. The program was meant to train a new generation of thinkers to push back against Brown (Brown vs. Board of Education) and the changes in constitutional thought and federal policy that had enabled it, but with the aid of money from Koch Industries and their friends (large sums of money) it had become the research-and-design center for a much more audacious national project. According to Pierre Lemieux, “The public choice revolution rings the death knell of the political ‘we.’”

    More a propagandist than an economist, Buchanan, showed craftiness in the names he gave to various elements of his economic theory—the Virginia school of political economy, as it came to be known. His study of how government officials make decisions became “public choice economics;” his analysis of how the rules of government might be altered so officials could not act on the will of the majority became “constitutional economics.” The enemy became “the collective order,” a code phrase for organized social and political groups that looked to government. Jargon aside, Buchanan used his center to refine his research program over the years while also figuring out how to develop a sophisticated strategy to implement his vision. The intellectual and the activist in him worked side by side, but one had enormous success while the other did not appear to be making much headway. For over two decades Buchanan waited and dealt with one disappointment after another. And then came Koch money and Ronald Reagan in the White House. And here we sit today dealing with the wreckage and suffering created by conservative politicians, Buchanan’s off kilter theories, and millions of dollars from Koch Industries.

    These are but three of the threads in the history of the story Geoff Davies tells. The others need to be explored as well.

  7. Ken Zimmerman
    October 2, 2019 at 11:27 am


  8. Craig
    October 2, 2019 at 5:25 pm

    There is no more fundamental re-working/transformational change than a paradigm change.

  9. Rob
    October 10, 2019 at 12:33 am

    Geoff, I looked forward to reading your book but apparently the shipper was unable to deliver to Japan. Perhaps when I get to the states in the future I can try again. Same think happened with Edward Fullbrook’s new book.

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