A New Perspective
New Directions in Modern Economics series
Neoclassical economics has long been divorced from the reality it purports to illuminate. But now that reality, in the form of characteristically turbulent capitalist dynamics, has asserted itself through a worldwide economic crisis. The crisis has damaged the livelihoods of hundreds of millions of people, some of whom were already living on a margin of survival. It has threatened political arrangements and overturned policy prescriptions in every country. And, in passing, it has brought the economics profession to a crossroad. Should it continue to put its reliance on the dominant paradigm, which spends almost all of its time extolling the virtues of a mythical perfect capitalism with only occasional asides on the implications of the stubborn ‘imperfections’ of the real world? Or should it reject the false dichotomy between perfect theory and imperfect reality, and work instead towards theory which is grounded in the real? This book takes the second path. The present crisis in the economics profession is not unprecedented. Much the same thing occurred in the 1930s. Then, as now, the economic orthodoxy preferred the safety of its blinkered precepts to the unpleasant reality of crumbling markets and mounting unemployment. Then, as now, government after government abandoned these theorists, who after all had little to say on such mundane matters, moving instead to a variety of practical measures based on deficit-financed public spending in which armaments eventually came to play a devastating role. But, at that time, Keynes’s General Theory had already been written, so that its prescriptions...