The first political and economics book I ever read, back in the 1970s, was The Coming War Between China and Russia by Harrison Salisbury. The book, published in 1969, was full of Armageddon-type fun and frolics, which, you might have noticed, never materialized. Academic economics book predictions are equally lousy. The entire corpus of economic textbooks, from the 1970s onwards, is a festering heap; chock-full of mistaken models, dubious monetary dogma and, often, outright fantasy. Shouldn’t at least one PhD egghead or informed publisher have seen the 2008 crisis coming? Even Karl Marx had foreseen it a hundred and fifty years ago. The Austrian school predicted it fairly accurately. Minsky likewise nailed it so well, they named the ‘moment’ after him.
Aussie economist Steve Keen recently described Gregory Mankiw’s undergraduate bible Macroeconomics (quite possibly the biggest seller in academia over recent decades) as ‘appalling’. Keen is a loveable character doing a splendid job of derailing modern economic thinking. Indeed, the title of his most popular work is Debunking Economics. One of Keen’s beefs with Mankiw presumably regards omission:
Coincidentally, many non-neoclassical economists whose writings have been put into the dustbin by today’s economics orthodoxy will be back on the shelves once more. Minsky, Schumpeter, Keynes, Veblen and Marx don’t rate a mention in most current economic textbooks; they had better feature in future texts, or by 2060 or so we’ll be back here again. (http://www.debtdeflation.com/blogs/2009/05/25/what-a-load-of-bollocks/)
Mankiw sets out an objective oversight of the discipline, but, wimpishly, barely dares to stray from the Yankophile neoliberal narrative present in just about every modern economic undergraduate book. So, for example, the dollar is king; markets, not policies or people, are the magic that leads us all to well-being. Gold, in spite of a five thousand year history, gets no mention amongst the book’s eight hundred pages, not even when the discussion turns to inflation. Noticeably absent too are bonds, sovereign or otherwise, less it be explicitly stated that America’s trade and budget deficits are paid for by the rest of the world. The real world dynamic is far different from the Mankiw model: out-flows of dollars spent on imports, are recycled back to the U.S. by means of the foreign purchases of US treasury bonds. Exporting countries like China can use their dollars for little else. As Michael Hudson states in Super-Imperialism; it’s the biggest free lunch in history. In fact Economics – A European Perspective by Olivier Blanchard is one of the rare examples that I can think of where themes such as the gold standard, or military-industrial complex do get a mention. When one considers that 50% (or more) of American taxes go towards military expenditure, that must surely merit, at least, an honorary macroeconomic mention.
The last thirty years have seen economics class books literally cloned. There exist at least twenty different books with the title Principles of Economics. Macroeconomics books are often sold with complementary microeconomics editions which often appear to be near exact, abridged version of the same. Nobel prize winning neoliberal stooge Paul Krugman even wrote (an incredibly mediocre) Microeconomics (with Robin Wells) that features an identical layout, font type and chapter order as Mankiw’s and features the same old erroneous mathematical models as thousands of other authors. The models invariably involve junk food production: ‘Consider the opportunity costs if Peter opens a pizza firm… Janet runs a doughnut shop…’
Students are tortured with chatty, cod academic materials which link theories to current news items from media sources like the New York Times or the WSJ. In doing so, they sneakily endorse mainstream conservative journalism. Lo and behold, it turns out the academic publishers are, in fact, part of the same massive publishing conglomerates as the news sources which they quote. Pearson Education, to name just one, has offshoots including Addison-Wesley, Prentice Hall, Heinmann, Wharton School Publishing, FT Press and Penguin Books. An undergraduate, studying a book such as Mathematics for Economics and Business, might wonder just how impartial their education is, were they to realize that the publisher is the Financial Times. Whereas many universities have long been criticized for being hotbeds of Marxism, business schools and economics faculties increasingly resemble neoliberal indoctrination camps.
Leafing through old editions of economic textbooks, we find blunderous journalistic waffle entitled ‘Public Spending May Have Reversed Japan’s Downturn’ (New York Times, 1999). Two decades later we’re still waiting. The deep Japanese recession and deflation woes continue. It’s not just Japan. The entire world has been sunk by the very (misnamed) Keynesian principles that the books expound. Seldom questioned is whether the models even work. As in the case of contemporary Japan, the modern approach is: if it doesn’t work, double-down. The idea appears to be a variation of the Martingale betting technique. If you play double-or-quits for long enough (and have enough credit to back you up) eventually you’ll win. World central banks and Wall Street have been practising the strategy for years. Huge investment banks can rely on zero-interest rates and unlimited credit to dominate in any market. Japan, like most of the western world too, uses exponentially larger dosage of Q.E., the same medicine, in a bid to reach their objectives. This is medieval monetary bloodletting. If one leach doesn’t cure the problem… And the intellectual justification is on sale in any business school bookshop. If a model doesn't work, it just needs tweeking. In the case of The Coming War Between China and Russia, the author would probably say, ‘I just got the dates wrong. It’s still coming.’ It’s all pure magical thinking.
The economic models being taught are simply out-of-date, fictitious or wrong. They are well-presented, readable trash, yeah. The Panic of 2008 and the Great Depression 2.0 have served as a sobering reality check. Forget that we’ve depleted the world’s resources as the population skyrockets. Forget that every nation, government, municipality and many households are technically insolvent. Modern texts uphold the idea that the crash was just a minor glitch and that happy days are just around the corner, when Mr. Market is allowed to work his magic. Economic publishers don’t need an invisible hand – they need a good, hard invisible boot up their neoliberal backsides.