Home > Uncategorized > A new real-world economics text book

A new real-world economics text book

The 2008 financial crisis, the rise of Trumpism and the other populist movements which have followed in their wake have grown out of the frustrations of those hurt by the economic policies advocated by conventional economists for generations. Despite this, textbooks continue to praise conventional policies such as deregulation and hyperglobalization.

This textbook demonstrates how misleading it can be to apply oversimplified models of perfect competition to the real world. The math works well on college blackboards but not so well on the Main Streets of America. This volume explores the realities of oligopolies, the real impact of the minimum wage, the double-edged sword of free trade, and other ways in which powerful institutions cause distortions in the mainstream models. Bringing together the work of key scholars, such as Kahneman, Minsky, and Schumpeter, this book demonstrates how we should take into account the inefficiencies that arise due to asymmetric information, mental biases, unequal distribution of wealth and power, and the manipulation of demand. This textbook offers students a valuable introductory text with insights into the workings of real markets not just imaginary ones formulated by blackboard economists.

A must-have for students studying the principles of economics as well as micro- and macroeconomics, this textbook redresses the existing imbalance in economic teaching. Instead of clinging to an ideology that only enriched the 1%, Komlos sketches the outline of a capitalism with a human face, an economy in which people live contented lives with dignity instead of focusing on GNP.

  1. Meta Capitalism
    August 26, 2020 at 10:11 am

    Look forward to reading.

  2. August 26, 2020 at 3:39 pm

    All behavior-based economic textbooks are false
    Comment on John Komlos on ‘A new real-world economics textbook’

    Mainstream economics is known for a long time to be dead and in need of a Paradigm Shift “There is another alternative: to formulate a completely new research program and conceptual approach. As we have seen, this is often spoken of, but there is still no indication of what it might mean.” (Ingrao et al., 1990)

    John Komlos echoes this insight “… how misleading it can be to apply oversimplified models of perfect competition to the real world. The math works well on college blackboards but not so well on the Main Streets of America.”

    However, “The problem is not just to say that something might be wrong, but to replace it by something — and that is not so easy.” (Feynman)

    John Komlos takes up the challenge. His textbook “… demonstrates how we should take into account the inefficiencies that arise due to asymmetric information, mental biases, unequal distribution of wealth and power, and the manipulation of demand.”

    This is laudable, except for one point: John Komlos’ approach is behavior-centered like the mainstream approach, only the behavioral premises have been changed and are certainly more ‘realistic’. However, John Komlos remains in the old economics-is-a-social-science paradigm. This is the lethal blunder because economics is a system science. Economics is NOT about how people behave but how the economic system behaves. Human behavior is the subject matter of psychology and sociology and history and political science but NOT of economics.

    Why do economists cling so tenaciously to the behavioral approach? Because they are political agenda pushers and NOT scientists. And politics is about the control of behavior. Economic incentives are but one form of behavioral control.

    It is a scientific fact that economics as social science has to this day not figured out what macroeconomic profit — the foundational concept of economics — is. The behavioral approach is a methodological failure. Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, and Pluralism are mutually contradictory, axiomatically false, and materially/formally inconsistent.#1, #2

    What economics needs is a Paradigm Shift from behavioral microfoundations to structural macrofoundations.#3

    This Paradigm Shift and its far-reaching consequences can be studied with Sovereign Economics. This textbook contains the axiomatically true theory as an indispensable prerequisite of economic policy guidance.

    “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

    John Komlos’ textbook is an outstanding example of educated commons sense. The fact of the matter is, though, that neither orthodox nor heterodox economists have realized to this day what science is all about.

    Egmont Kakarot-Handtke

    #1 Economics is a disgrace ― now more than ever
    https://axecorg.blogspot.com/2020/08/economics-is-disgrace-now-more-than-ever.html

    #2 Wikipedia, economics, scientific knowledge, or political agenda pushing?
    https://axecorg.blogspot.com/2020/06/wikipedia-economics-scientific.html

    #3 Your economics is refuted on all counts: here is the real thing
    https://axecorg.blogspot.com/2020/06/your-economics-is-refuted-on-all-counts.html

    • August 27, 2020 at 10:16 am

      Egmont says ” Human behavior is the subject matter of psychology and sociology and history and political science but NOT of economics.”

      I would say, on the contrary, what is today called ‘economics’ is not a social science because it does not directly study the human behaviour known as ‘provisioning’, i.e. the goals and modes of operation of families and firms.

      Egmont, I totally agree with you when you say “What economics needs is a Paradigm Shift from behavioral microfoundations to structural macrofoundations.#3”. I too found myself starting from Cartesian coordinates, but by page 3 of your book “Sovereign Economics” I was disagreeing with you. Not just the negative but the imaginary coordinates are indicative of the structure comprising feedback loops.

      Simple negative feedback corrects errors but integral negative feedback stabilises unstable systems. [Google “Origin of negative feedback” and “Integral Feedback”]. Positive feedback – trying to increase output by upping the driving force – decreases compensation for errors and if taken too far comes up against environmental limits, i.e. the Maximum Power Transfer Theorem. I see you are still banging on about Keynes, but his countercyclic policy was integral feedback to stabilise prices by correcting failures of employment: not as his enemies portray him, setting fiscal control against market feedback. His remedies too were macro – logical rather than numerical.

  3. Craig
    August 27, 2020 at 5:03 pm

    Macro-economics is largely (not entirely) a misguided distraction from micro-economics and was a fall back created discipline that de-volved out of the failure to confront the de-stabilizing effects of the current monetary and financial paradigm after The Great Depression.

    It can redeem itself only if it continues to contemplate the emergent qualities of chaos (which is really a misnomer for the ever evolving dynamic, interactive and integrative natural philosophical concept of grace which is the actual state of the temporal universe) and applies that knowledge to change the above current paradigm with policies and regulations that economically and ethically align with it.

  4. Ken Zimmerman
    September 19, 2020 at 4:37 pm

    For me, this book is troubling. Komlos ends his book this way.

    This textbook accentuated the weaknesses of mainstream economic theory and underlined the need for a paradigm switch toward humanistic economics in which people count, the quality of life counts, and not an economy driven by greed. It is not that markets are bad, but that markets need the right set of institutions and the right culture in order to function properly, that is, in order that their participants can live carefree, dignified lives. It requires a great deal of insensitivity to evidence to continue to teach that markets are efficient after the greatest meltdown in the history of mankind.

    Hence, we need to reform the economics discipline so that it begins with empirical evidence as its basis rather than deductive theories written on college blackboards. I hope this volume can make a contribution toward creating a new approach to economics that will serve as a foundation for a new regime of capitalism with a human face.

    These two paragraphs sum up, for me most of what is wrong with this book. First, as a social scientist, it is not the role of Komlos to advocate for or against “a new regime of capitalism with a human face.” Komlos spends significant effort and space in the book describing some of the ways in which some current economic arrangements harm some people and help foster inequality of wealth and power for some members of American society. A legitimate vocation for a social scientist. Even with such a classically liberal critique as that offered by Mr. Kolmos. Mr. Kolmos never asks such non-liberal questions as, if and why firms, free trade, or markets are necessary at all. Or, what is a “more humane form of capitalism?” However, in this effort Komlos does not fulfil his stated goal to begin with empirical evidence rather than “deductive theories written on college blackboards” as the basis for this work. In part, Komlos is not to blame for this mistake since no work by any social scientist ever begins without some model (even a very informal one, or mental model) of the work to be undertaken or the terrain in which the subject of study resides. But there is another, more serious problem with Kolmos’ work. He begins his work with a formal and clearly mainstream economic model. Afterall, his goal is to put a human face on capitalism. Two main concerns here. First, humans invent humanity, what is human and what is not. And reside within and reinvent these on a regular basis. So, rather than beginning with capitalism or any other economic or social model, Kolmos needs to begin with the latest version of humanity people have invented. Anthropologists (and others) call such inventions culture. Economic ways of life are part of culture, as are each of the social science disciplines, including economics. But people do not seal tight the borders between the various areas of life they invent that make up culture. In the case of economics, its inventors often bring in religion, family life, marriage, government, bodily functions, emotions, etc. And while culture may sometimes provide tools for or against cooperation to help lower transaction costs and improve business relations, as Kolmos suggests, it is not limited to any such. Culture is what makes any economics, all economies possible and either workable or failures. Anyone, such as Mr. Kolmos studying economic life must consider the totality of culture to fully grasp this life. Kolmos clearly does not do so. Second, social science disciplines are also part of culture and thus are affected by and effect all the other aspects of culture. Not recognizing these origins of one’s social science leads to the kind of remoteness expressed by Kolmos.

    The adage about good intentions and the road to hell applies to this book, in my view. Mr. Kolmos has good intentions, but the end of his road is a blind alley hell, not enlightenment.

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