Sunday Book Review #33 ? Zombie Economics by John Quiggin ? Mike ...

Zombie Economics?is sub-titled ?How Dead Ideas Still Walk Among Us.?? As usual, the sub-title does an excellent job of describing the book.

The author Quiggin?tells us that a zombie is something that should be dead, but it stubbornly refuses to pass away.? He contends that the field of economics is replete with concepts and theories that have been definitively proven false, yet like a zombie in a movie they continually spring back to life at inopportune times.

Zombie Economics comprises five chapters, one for each zombie economic concept:

1. The Great Moderation.? This is the idea that the business cycle has been tamed.
2. The Efficient Markets Hypothesis.? The idea that the financial markets are the best possible guide to the value of economic assets and therefore to decisions about investment and production.
3. Dynamic Stochastic General Equilibrium (DSGE).? This is the idea that aggregate?economic phenomena, such as economic growth, business cycles, and the effects of monetary and fiscal policy, can be?explained on the basis of macroeconomic models derived from microeconomic principles
4. Trickle-down Economics.? The idea that an economy is most productive when it enables the most productive to become rich because their wealth will trickle down to the others.
5. Privatization.? The idea that economic activities are better conducted by private companies instead of by government agencies.

The author claims that the Global Financial Crisis of 2007-2008 has proven that these ideas are failures ? i.e., the Crisis was not predicted and instability and inequity have increased.? For the future, he recommends that we focus more on realism, less on rigor; more on equity, less on efficiency; and more on humility, less on hubris.

Zombie Politics

Incidentally, until recently I didn?t pay a lot of attention to conservative radio and, therefore, I didn?t realize that conservatives believed that a lot of my heretofore unchallenged bedrock values were actually zombies that needed to be?killed.? For example, I was taught?in law school to believe in the separation of?church & state, and was surprised to learn during my congressional campaign that conservatives no longer believed in that separation and they blamed non-Christian Thomas Jefferson for starting this canard.

In law school, I was also taught that the federal government had expansive authority to regulate interstate commerce, and again was surprised to learn that conservatives had decided this authority was unconstitutional.

Another example ? I was taught in college economics that you increase spending to counter a recession and increase taxes to counter a deficit.? Modern conservatives believe the opposite ? you cut spending in a recession and you decrease taxes to raise more tax money.

Source: http://mkueber001.wordpress.com/2011/06/05/sunday-book-review-33-zombie-economics-by-john-quiggin/

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