Tuesday, February 18, 2020

Why the fantasy world of neoclassical economics is undermining our wellbeing — Richard Murphy

Richard Murphy comments on Peter Bofinger's article, linked to here at MNE yesterday. Progressives and others on the so-called left need to read and understand this. The right won't pay any attention to it since it is Keynesian.

Tax Research UK
Why the fantasy world of neoclassical economics is undermining our wellbeing
Richard Murphy | Professor of Practice in International Political Economy at City University, London; Director of Tax Research UK; non-executive director of Cambridge Econometrics, and a member of the Progressive Economy Forum


Ralph Musgrave said...

Can't see what the argument is about. It is perfectly feasible for someone to save up enough money to buy a car. Equally it is perfectly feasible for anyone with no cash to spare, but who appears to be credit worthy to a bank, to borrow money with which to buy a car.

Calgacus said...

The point is the direction of causation - in the simplified no government, closed economy I=S, but how do I and S match up? The incorrect classical direction is people save and then lend savings. The correct Keynesian direction is that the act of investment is done on credit and this credit/money constitutes saving. So I causes S.

In your example, the saver isn't "investing" in a car. His savings could only have arisen from prior investment. They have already been matched off with that. There can never be any savings that doesn't come from investment. It's just accounting plus common knowledge of how the arrows of time go, how people speak about them. There are great papers on this by John Fagg Foster and by his wife, Gladys Parker Foster. Alain Parguez says that this is basically the heart of the Keynesian revolution.

Bob Roddis said...

The problem with this Keynesian fantasy is that there is no such thing as "Neoclassical Economics". It's just another case of endless Keynesian gaslighting meant to sidestep and avoid any meaningful engagement of the definitive Austrian takedown of the Keynesian Hoax.

S400 said...

Ah the right wing denial of neoliberalism. Everything they’ve pushed and then been proven not to work or been plain wrong they will deny ever existed. Constant history revision you might say they engage in.