The Irreconcilable Inconsistencies of Neoclassical Macroeconomics
A False Paradigm
By John Weeks
Published February 23rd 2012 by Routledge – 278 pages
In the course of this book it is argued that the loss of what is essentially "macro" in Keynes is the result of a preference for a form of equilibrium analysis that gives unqualified support to the ideology of free markets. In the case of Marx, his theory of exploitation and from this the stress on class struggle, led to an almost complete neglect of his contribution to the analysis of the aggregate demand and supply of commodities.
John Weeks has written a lucid, engaging and persuasive critique of orthodox macroeconomics. In doing so, he provides an important counterpoint to the neoclassical perspective, to question not just its prescriptions but also its analysis. The book demonstrates that some of the most fundamental, indeed influential, propositions in orthodoxy are fallacies: that markets by themselves ensure full employment, or that inflation everywhere is a monetary phenomenon. In its near obsessive concern with the micro-theoretic foundations of macroeconomics, orthodoxy forgets that the whole is different from, if not greater than, the sum total of the parts. For an understanding of the world around us, the author argues, it is time for macroeconomics to return to the thinking of Marx and Keynes. This is a valuable alternative text for those who have questions or concerns about mainstream macroeconomics in most textbooks.
Deepak Nayyar, Professor of Economics, Jawaharlal Nehru University, New Delhi, and Distinguished University Professor of Economics, New School for Social Research, New York
Even after the global economic calamities tied to the Wall Street Crash and Great Recession of 2008-09, the view still prevails among both professional economists and policymakers that free market economies work best. In this book, Professor John Weeks powerfully demolishes neoclassical macroeconomic theory, the intellectual foundation for all such free-market celebrations. Weeks also goes further, by clearing the ground for us to think in fresh ways about a macroeconomic framework capable of delivering full employment, stable financial markets and a sustainable environment.
Robert Pollin, Professor of Economics and Co-Director, Political Economy
Research Institute (PERI), University of Massachusetts-Amherst
John Weeks has written a passionate indictment of mainstream macroeconomics. His audience is sceptical students (and their teachers) who are puzzled about the lack of contact between what their textbooks and "learned" journals say about how things happen and what should be done about them, on the one hand and what they observe in the day-to-day happenings of the world in which they live, on the other. Weeks has absorbed the approach and details of the mainstream literature, reduced it to its essentials and examined its internal logic, which he often finds either wanting, or so dependent on special assumptions for which there is little economic justification as to be of limited applicability, or none at all. He contrasts these findings with the more relevant approach to be found in the writings of Marx, Keynes, and Weeks' own institutionalist teachers of long ago. False Paradigm is the best sort of textbook - clear, honest, challenging and relevant.
G. C. Harcourt, School of Economics, University of New South Wales My heart goes out to those young people who, spurred on by the financial crisis, embark on a course in economics. Invariably they confront an orthodoxy taught by a profession that failed to predict the crisis, failed to explain it and failed to offer remedies. Indeed the economics profession, with very few notable exceptions has stood aloof, disdaining to offer society, and in particular young people, an understanding of, and a way out of the crisis. Not so John Weeks. This book applies academic rigour to shed light and understanding. It is for anyone with a sceptical mind wanting to understand and make sense of today's financial mayhem - and keen to challenge the discredited economics that precipitated the crisis of August 2007 - a crisis that is still ongoing.
Ann Pettifor, Executive Director of Advocacy International With intellectual rigour and passion for human progress, this book shows how much the dominant economic approach is based on false premises, faulty logic and ideological blindness. Even more important than its sharp and profound criticisms of all aspects of orthodox macroeconomics is its ability to develop the faculty for critical reflection in the reader. It is a must-read for everyone who is interested in understanding what is happening in the world economy today.
Ha-Joon Chang, University of Cambridge
Introduction Part 1: Methodology of the Neoclassical Macro Model 1. The Demand Side of the Neoclassical Model 2. The Neoclassical Model with a Supply Side 3. Comparative Statics and Equilibrium 4. Money in the Neoclassical Model Part 2: Paradigm Lost: The Basic Neoclassical Model 5. The Classical False Dichotomy Model 6. Logically Consistent Money-Neutral Models 7. The "Complete" Model with a Wealth Effect Part 3: A Critique of Self-Adjusting Full Employment 8. Neutrality and Full Employment 9. Expectations and Full Employment 10. Full Employment and Multi-Commodity Production 11. Full Employment and Disequilibrium Part 4: The "Open" Economy: Presentation and Critique 12. Introduction to "Open Economies" 13. The Neoclassical Open Economy 14. Reassessing Monetary and Fiscal Policy Part 5: Paradigm Regained: Reclaiming Policy 15. Neoclassical Inflation: The Keystone of Reactionary Macro Policy 16. Decommissioning Policy Tools 17. The Critique Summarized
John Weeks is Professor Emeritus and Senior Researcher at SOAS, University of London, UK