A New Model of the Economy [Hardcover]

We are short of visionary but sound proposals for the reform of Economic thought and method, but here we have one. It is a blessing to be given a new dimension to settled, conventional views - and a more complete view of economic workings that brings economic theory in much closer touch with reality. Very refreshing.

He writes with simple clarity, his fine diagrams communicate well, there are virtually no mathematics. Attention needs to be given, but this is readable by non economists, who may pass the technical bits put there to satisfy professionals, without loss. He pulls together the various elements of the 'new model' which has serious implications for any economist or politician hoping to remedy ominous symptoms of disaster appearing just now.

For lecturers with high standards the book could widen discussion where students are pedestrian, economic journalists need to read it, and it will inspire those who find the economic situation bewildering and intolerable.

Brian Hodgkinson is one of the members of the School of Economic Science (SES). He was a student of the late Leon MacLaren, who was the main founder of that School. Leon MacLaren was also chief creator of the original teaching material on economics for the School, "The Nature of Society" (ASIN: B0024ZM53O or B002I9DVP2). "The Nature of Society" examines the fundamentals of mainly proprietary economics, based on the nature of society, which may help reform property ownership. The SES has always had an inclination to be more partial to its members who have had university education, which explains the academic nature of the "New Model".

"A New Model of the Economy" is a development on the original economic thinking of "The Nature of Society", but with more technical analysis. It appears the more arguments thinkers develop to counter the obviously covetous "wealth robbers" of our society, the more complex and distant the explanations become for solutions. I would recommend reading "The Nature of Society" first. However, there is an irony in the teachings of the School of Economic Science: The philosophical teaching of the School looks at the fundamental nature of the individual in society, whereas the economic teaching of the School looks at secondary, diverse aspects of economic society without relating it to the philosophical teaching. The two "Schools of Thought" have diverged, and don't seem to relate, and neither does the School's teachings relate them. I would say the best solution to the quandary of our centuries-old conflict in nature with greed is to be found at the International Simultaneous Policy Organisation website.

"A New Model of the Economy" would appeal to the more cerebral of readers. However, the problem this discourse has is the problem of most all studied economics: It has omitted (through absence of fundamental understanding) the rôle of money that is being issued for over 300 years now, which is privately (not state-) created debt-based money, created through the fractional reserve system of money-creation. This debt-based money does not represent actual goods & services created by labour, which is why we've been getting perpetually hundreds of devastating economic "booms & busts", and it fuels the incongruous land closures that this book speaks of. The situation is worsened when money is not just used as a means of exchange for goods & services, but when used as a commodity for trading as well (currency-trading): Devastation ensues for trading nations whose currencies are devalued, not because the quality/quantity of their imports/exports have changed, but purely because currency traders behave like marauding packs of hyenas making a killing for profitable greed. None of the aforesaid will change because our pension schemes, inter alia, have become part of these moneymaking schemes. The more money is used for other than its original purpose, the more complex and corrupt it becomes.

Islamic sharia law forbids this complexity, yet none of this is even mentioned in this book. In fact and truth, our current, Western "civilisation" money is state-sanctioned counterfeit money. When a government is dependent upon private bankers for money, the bankers, not the leaders of the government, control the nation. As a plutocrat once said: "Control money, and you control governments".

The economist John Maynard Keynes (1883 - 1946) once said: "The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else". What kinds of economic advisors are currently advising our governments on their economic and business policies? Would the aspiring economic leaders of the SES do any better?

---------------------------------------------------

Brian Hodgkinson's book deftly pulls together many strands of alternative economic thought and presents them in a format - an economics textbook - which no economist can easily dismiss.

He begins by distinguishing between the kind of economic freedom that would give all citizens fair access to the means to a meaningful and productive role in society, and the current sham freedom to accumulate immense personal wealth, which can only ever be enjoyed by a small minority.

He goes on to decry the failure of conventional economics to acknowledge the pivotal role of land. As work and space constitute the "primary requirements of human existence, the conditions under which land is available is of fundamental significance". He explains how, even in a post-industrial economy like that of the UK where financial services dominate, the way land is treated has a massive impact on social outcomes.

In the first half of the book, Hodgkinson presents a revised theory of the firm, the basis for all study of microeconomics. He explains how the established version is woefully deficient and supports this assertion with beautifully reproduced graphs and diagrams; the staple diet of serious students of economics. As he builds his case, the subtle but fundamental differences between his graphs and those that illustrate the standard economics texts bring home just how damaging shortcomings in the conventional view really are. Just as anthropology was hi-jacked in the 19th century to justify the racist policies of colonial domination, so, it appears, an equally fallacious rendering of economics was applied to justify the continuation of a society based on minority wealth and privilege.

For those not excited at the prospect of poring over marginal cost curves and the like, Hodgkinson draws on the best of Smith, Ricardo, Schumpeter and Keynes to make his case. His assessment, and rigorous updating, of the established macro-economic model is if anything more devastating. He includes chapters on housing, trade, the business cycle, financial speculation and the problems associated with the way banks are allowed to create money as debt.

Hodgkinson might have given more space to the environment, especially as the new economics he outlines lends itself more readily than the current model to the challenges of global warming and resource depletion. But he nonetheless provides a good foundation for a new green economics.

The policy conclusions he arrives at will doubtless make many uncomfortable, especially the notion that while land should remain under private ownership, the rent it earns should become public revenue. But better than any previous advocate of such land reform, Hodgkinson explains the knock-on effects of that reform for all aspects of the economy. His conclusions are the only possible conclusions from an exercise in economic theorising which is both acutely rational and shot through with a moral conviction that economists have lacked for far too long.

Robert Skidelsky was only partly right to ask "are market economies 'naturally' stable or do they need to be stabilised by policy?" The market economy will not be stabilised by any set of policies which fails to recognise shortcomings in the underlying economics. But a stable, efficient and just economy, and one that enhances the freedom of all citizens, could be constructed on the revised theoretical foundations provided by Brian Hodgkinson in this remarkable book.