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Steven Kates

This book explains the importance of the history of economic thought in the curriculum of economists, whereas most discussions of this kind are devoted only to explaining why such study is of value simply to the individual economist. Steven Kates reaches out past the individual to explain the crucial importance of the history of economic thought in the study of economics itself; without its history at the core of the curriculum, he contends, economics is a lesser subject, less penetrating, less interesting and of much less social value.
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Steven Kates

. The challenge of different ideas, the true life of scholarship, is almost invariably diminished. And I would emphasise this: that if learning the history of economics doesn’t interest you then economics itself doesn’t really interest you. If the history of economics doesn’t interest you, then you should perhaps find some other area of study. ECONOMICS WILL NEVER BE A SETTLED SCIENCE Everything you read in an economics text was once controversial. In fact, just about everything you read in an economics text is still controversial, and this will be as true as far

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Steven Kates

profound effect on macroeconomics. Five separate neutrality results overturned aspects of macroeconomics that Keynesians had previously considered incontestable. These five neutralities are: the independence of consumption and current income (the life-cycle permanent income hypothesis); the irrelevance of current profits to investment spending (the Modigliani-Miller theorem); the long-run independence of inflation and unemployment (natural rate theory); the inability of monetary policy to stabilize output (the Rational Expectations hypothesis); and the irrelevance of

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The rediscovery of classical econoics

Adaptation, Complexity and Growth

David Simpson

certain common principles that distinguish it from the paradigm of equilibrium theory that in the twentieth century dictated not only what were acceptable methods of economic analysis but, corresponding to that methodological monopoly, what were the appropriate topics of enquiry. Foremost among classical principles is the belief that the primary purpose of economic analysis should be the study of economic progress, that is to say change and growth. It is the rate of growth of its output that will determine the material well-being of a society. For the older classical

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Qualitative change and quantitative growth

Adaptation, Complexity and Growth

David Simpson

. Nevertheless, from the first quarter of the twentieth century onwards the focus of attention amongst mainstream economists shifted decisively from change and growth towards the determination of prices,4 and hence to the use of equilibrium methods of analysis. Since then questions of change and growth in the economy, despite their urgency for voters and politicians, have generally been ignored in the mainstream academic literature.5 Then, some 25 years ago natural scientists began to notice the pervasiveness of evolving self-organising systems (Prigogine 1996). One of the

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Seld-organization and complexity

Adaptation, Complexity and Growth

David Simpson

5. Self-organisation and complexity Is the economy a self-organising system? Of course it is! Paul Krugman1 A self-organising system is one whose elements, starting from a state of randomness or instability, organise themselves through mutual adjustment of their behaviour so that the system as a whole exhibits a stable and persistent pattern of behaviour at the aggregate level. A self-organising system is really a network of self-organising processes, and self-organising processes are pervasive in natural as well as in social phenomena. In human societies, self

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Prosperity and recession

Adaptation, Complexity and Growth

David Simpson

Commerce (Bateman 2006: 472). THE AUSTRIANS In his Theory of Money and Credit, first published in 1912 but not translated into English until the 1930s, Mises offered a purely monetary explanation of the business cycle. It was due to the behaviour of the banks, which expanded credit ‘excessively’ thus pushing the money rate of interest below the natural rate. (Credit creation is ‘excessive’ when it is not backed by saving.) The effect on the real economy is to lengthen processes of production, which tend to become too capital-intensive. The resulting investment errors

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Adaption, emergence and evolution

Adaptation, Complexity and Growth

David Simpson

has been an explosion of formal education throughout the world. Vastly increased numbers of people are passing through courses of secondary, vocational and higher education. Many millions more are acquiring knowledge through the Internet. Formal instruction like this may indeed be the better way of acquiring knowledge of the natural sciences. On the other hand, learning-by-doing may be more effective in those areas of human behaviour, such as the arts5 and business, where knowledge is necessarily incomplete. When writing a book it is often while actually writing it

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The Rediscovery of Classical Economics

Adaptation, Complexity and Growth

David Simpson

David Simpson skilfully argues that a market economy can be best understood as a human complex system, a perspective that represents a continuation of the classical tradition in economic thought. In the classical tradition, growth rather than allocative efficiency is the principal object of enquiry, economic phenomena are recognised to be elements of processes rather than structures, and change is evolutionary.
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Government

Adaptation, Complexity and Growth

David Simpson

its vision because Beveridge argued that his proposals had to be placed in the context of a comprehensive social policy that would tackle the other four Giants as well.19 Although revolutionary in its vision of the responsibilities to be assumed by the State, in terms of operating principle and the institutional changes proposed the Report was no more than evolutionary. In Beveridge’s own words it was ‘a natural development from the past’ (ibid: 255). His plan envisaged that in return for a single weekly flat-rate contribution, a worker would receive cradle