New book reveals shortcomings in economics‘ basics
SOMEONE needed to write a book about how economic theory has been abused in US politics.
And someone finally did. James Kwak’s Economism is a very important and timely book, and anyone who is interested in public affairs should read it.
Kwak, a University of Connecticut law professor, spins a tale of how simple supply-and-demand theory fed a free-market ideology that led to a financial crash, a dysfunctional health-care system, spiralling inequality and a threadbare social-safety net.
The basic idea is that by getting everyone to think in Econ 101 terms – perfectly competitive well-functioning markets, rational well-informed consumers and so on – free-marketers were able to redefine the terms of the national debate to favour their own interests. With Econ 101 as everyone’s default lens, Kwak argues, government programmes and regulations start to seem dangerous and inefficient, while inequality begins to feel like the natural and just order of things.
Simple theories can maintain an almost unshakeable grip on our thinking. The Econ 101 theory of supply and demand is fine for some products, but it doesn’t work well for labour markets.
You should read Kwak’s book, even though it doesn’t explain why economism has been so successful at capturing people’s hearts and minds. – Bloomberg