Seven Bad Ideas

Seven Bad Ideas

How Mainstream Economists Have Damaged America and the World

Book - 2014
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A bold indictment of some of our most accepted mainstream economic theories--why they're wrong, and how they've been harming America and the world.

Budget deficits are bad. A strong dollar is good. Controlling inflation is paramount. Pay reflects greater worker skills. A deregulated free market is fair and effective. Theories like these have become mantras among American economists both liberal and conservative over recent decades. Validated originally by patron saints like Milton Friedman, they've assumed the status of self-evident truths across much of the mainstream. Jeff Madrick, former columnist for The New York Times and Harper's, argues compellingly that a reconsideration is long overdue.

Since the financial turmoil of the 1970s made stagnating wages and relatively high unemployment the norm, Madrick argues, many leading economists have retrenched to the classical (and outdated) bulwarks of theory, drawing their ideas more from purist principles than from the real-world behavior of governments and markets--while, ironically, deeply affecting those governments and markets by their counsel. Madrick atomizes seven of the greatest false idols of modern economic theory, illustrating how these ideas have been damaging markets, infrastructure, and individual livelihoods for years, causing hundreds of billions of dollars of wasted investment, financial crisis after financial crisis, poor and unequal public education, primitive public transportation, gross inequality of income and wealth and stagnating wages, and uncontrolled military spending.

Using the Great Recession as his foremost case study, Madrick shows how the decisions America should have made before, during, and after the financial crisis were suppressed by wrongheaded but popular theory, and how the consequences are still disadvantaging working America and undermining the foundations of global commerce. Madrick spares no sinners as he reveals how the "Friedman doctrine" has undermined the meaning of citizenship and community, how the "Great Moderation" became a great jobs emergency, and how economists were so concerned with getting the incentives right for Wall Street that they got financial regulation all wrong. He in turn examines the too-often-marginalized good ideas of modern economics and convincingly argues just how beneficial they could be--if they can gain traction among policy makers.

Trenchant, sweeping, and empirical, Seven Bad Ideas resoundingly disrupts the status quo of modern economic theory.
Publisher: New York : Alfred A. Knopf, 2014
ISBN: 9780307961181
Branch Call Number: 330.973 M267s
Characteristics: 254 pages


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Aug 08, 2017

If the world relied on me for its economic policy, everything would rapidly devolve. According to author Jeff Madrick, American and Western European mainstream economists haven't done a whole lot better since the 1970s. Applying lessons from legends like Adam Smith, John Maynard Keynes, and Jean-Baptiste Say, economists and politicians have applied theories like "the invisible hand" and "reducing budget deficits during periods of weak economic growth" -- austerity economics -- at macroeconomic levels, where such solutions couldn't work. Applying the same ideas that worked during the 1950s and 1960s haven't reaped the same rewards they did in those postwar decades. The language in this book is simple enough that even a lunk-head like me gets most of what Madrick says.

I was born in '69, which means, if we take Madrick at his word, the West's economic policies have have been screwed my entire lifetime. The way some of Europe's countries are thinking of leaning further right in the political spectrum makes me believe economics won't be getting better.

I'm being very, very oversimplistic in my explanation of why I think this is a good read. If it holds together for even normal folk like me, I bet it would for you too. Best if I leave it at that, and let you, the reader, see why.

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