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A crucial work for understanding the failures of neoclassical economics
on 11 May 2009
For people, like me, who had almost given up entirely on the academic field of Economics when I first started reading on the topic because of ridiculous theories and poor teaching, there is fortunately still Steve Keen. In this book, the Australian Keen shows the errors of the standard views of neoclassical (orthodox) economics.
Not just some side aspects of the theory, but the actual core views of economics as it is taught in universities everywhere unravels before your eyes. Keen masterfully applies both economic models and historical analysis to show that orthodox economists not only do not know what theories exist in their own field, but they also have no inkling of the history of economics and what this means for their approach. This, combined with a possibly even poorer understanding of the philosophy of science (Keen uses Milton Friedman as the main example, but more could have been named), leads to a series of ridiculous assumptions and even more ridiculous results. That the economists consistently ignore the way industrial managers and market analysts etc. do NOT apply their pet theories is just the icing on the cake.
The book is heavy reading for those with no knowledge of economics or maths, but certainly not impossible. A basic understanding of economics and mathematics as taught at high school level (at least in The Netherlands) goes a long way, and Keen fortunately writes well and attempts to avoid long mathematical proofs as much as possible.
The only downside to the book is that his treatment of alternative theories, especially the quite closely linked Austrian school of economics, is very short and vague, and his criticism of Marxist economics is incompetent and useless, done from a Sraffian perspective. This leads to the impression that Keen knows what's wrong with neoclassics, but not what is to be done instead. Therefore, start by reading this book, but don't end there.