Zombie Economics: How Dead Ideas Still Walk among Us

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Overview

In the graveyard of economic ideology, dead ideas still stalk the land.

The recent financial crisis laid bare many of the assumptions behind market liberalism--the theory that market-based solutions are always best, regardless of the problem. For decades, their advocates dominated mainstream economics, and their influence created a system where an unthinking faith in markets led many to view speculative investments as fundamentally safe. The crisis seemed to have killed off these ideas, but they still live on in the minds of many--members of the public, commentators, politicians, economists, and even those charged with cleaning up the mess. In Zombie Economics, John Quiggin explains how these dead ideas still walk among us--and why we must find a way to kill them once and for all if we are to avoid an even bigger financial crisis in the future.

Zombie Economics takes the reader through the origins, consequences, and implosion of a system of ideas whose time has come and gone. These beliefs--that deregulation had conquered the financial cycle, that markets were always the best judge of value, that policies designed to benefit the rich made everyone better off--brought us to the brink of disaster once before, and their persistent hold on many threatens to do so again. Because these ideas will never die unless there is an alternative, Zombie Economics also looks ahead at what could replace market liberalism, arguing that a simple return to traditional Keynesian economics and the politics of the welfare state will not be enough--either to kill dead ideas, or prevent future crises.

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Editorial Reviews

Economist
Entertaining and thought-provoking. . . . [W]orks as a good summary for non-specialists of how the economics debate has developed.
— Philip Coggan
Barron's
Lucid, lively and loaded with hard data, passionate, provocative and . . . persuasive. . . . [Zombie Economics] should be required reading, even for those who aren't Keynesians or Krugmaniacs.
— Glenn C. Altschuler
Shanghai Daily
This book is certainly a good read for anyone eager to know why it is urgent that economists come up with a socially useful body of thought or suggestions.
Financial Times
Quiggin is a writer of great verve who marshals some powerful evidence.
Bloomberg News
Erroneous economic ideas resemble the living dead, writes John Quiggin in his smart new book Zombie Economics. They are dangerous yet impossible to kill. Even after a financial crisis buries them, they survive in our minds and can rise unbidden from the necropolis of ideology.
— James Pressley
Guardian
The financial crisis has disproved many cherished tenets of 'market liberalism', such as the 'Efficient Markets Hypothesis', yet these zombie ideas still shamble through newspapers and journals. Enter economist Quiggin, calmly wielding dual shotguns to blast them relentlessly in the face. . . . As Quiggin explains with elegance, lucidity and deadpan humour, the undead ideas here are interconnected: killing one causes it to knock over another in a sort of zombie-dominoes effect.
Globe & Mail
Zombie Economics is . . . a highly readable and sobering assessment of the role played by discredited economic ideas in the global financial and economic meltdown of 2008-09. Quiggin delves deeply into the origins and development of all the star culprits so loved by the economic right in recent decades: from the efficient markets hypothesis to privatization and Real Business Cycle Theory. None has stood up to the stern test posed by real markets and economies in crisis. Yet most live on, still featured in many curriculums and advocated by those academics who have staked their careers on them.
Biz Ed
It's hard to resist a book called Zombie Economics, and University of Queensland professor John Quiggin makes his tale as compelling as his title. . . . It's the rare read that's both thoughtful and fun.
Sydney Morning Herald
I haven't done justice to Quiggin's book, so if you're interested in a readable exposition of the exploits of academic economists over the past 35 years I recommend it highly. It's the story of how economists forgot much of what they knew. Please, guys, don't do that again.
— Ross Gittins
The Age
As well as exposing how these flawed ideas brought on the global crisis and how they live on, Quiggin offers his view on a new way forward in economic theory. It's time to bury the zombie.
— Fiona Capp
Choice
From the so-called 'great moderation' concept to the implications of the efficient markets hypothesis, Quiggin does an excellent job summarizing each zombie idea and explaining why it is discredited in a simple (but not simplistic) manner.
The Nation
[Cogent] and readable . . .
Naked Capitalism blog
Cleverly titled, with a wonderful and very un-academic cartoon cover and written without excessive jargon, Zombie Economics provides an elegant critical introduction and analysis of some of the key ideas of modern economic thought.
— Satyajit Das
SN&R
Put a bullet through the decaying brain of walking-dead economics by reading Quiggin.
— Seth Sandronsky
Administrative Science Quarterly
I encourage my colleagues in sociology, psychology, and management to read this book and leverage it to lead to a more integrated social science and, perhaps, a more socially aware economic science.
— Brent Goldfarb
Economist - Philip Coggan
Entertaining and thought-provoking. . . . [W]orks as a good summary for non-specialists of how the economics debate has developed.
Barron's - Glenn C. Altschuler
Lucid, lively and loaded with hard data, passionate, provocative and . . . persuasive. . . . [Zombie Economics] should be required reading, even for those who aren't Keynesians or Krugmaniacs.
Bloomberg News - James Pressley
Erroneous economic ideas resemble the living dead, writes John Quiggin in his smart new book Zombie Economics. They are dangerous yet impossible to kill. Even after a financial crisis buries them, they survive in our minds and can rise unbidden from the necropolis of ideology.
Sydney Morning Herald - Jessica Irvine
[A]n excellent new book.
Sydney Morning Herald - Ross Gittins
I haven't done justice to Quiggin's book, so if you're interested in a readable exposition of the exploits of academic economists over the past 35 years I recommend it highly. It's the story of how economists forgot much of what they knew. Please, guys, don't do that again.
The Age - Fiona Capp
As well as exposing how these flawed ideas brought on the global crisis and how they live on, Quiggin offers his view on a new way forward in economic theory. It's time to bury the zombie.
Naked Capitalism blog - Satyajit Das
Cleverly titled, with a wonderful and very un-academic cartoon cover and written without excessive jargon, Zombie Economics provides an elegant critical introduction and analysis of some of the key ideas of modern economic thought.
SN&R - Seth Sandronsky
Put a bullet through the decaying brain of walking-dead economics by reading Quiggin.
Administrative Science Quarterly - Brent Goldfarb
I encourage my colleagues in sociology, psychology, and management to read this book and leverage it to lead to a more integrated social science and, perhaps, a more socially aware economic science.
Bullfax.com Stamas
Peppered with humorous quotations, theory and history, Quiggin has assembled a compelling read about the misguided intellectual economic assumptions of the last forty years and also gives possible solutions to our current financial dilemma.
From the Publisher
One of Bloomberg News's (bloomberg.com/news) Top Thirty Business Books of the Year for 2010

Co-Winner of the 2012 Gold Medal Book Award in Economics, Axiom Business

One of Financial Times (FT.com)'s Books of the Year in Nonfiction Round-Up in the Science & Environment list for 2010

One of Naked Capitalism blog's , "Must Read" Economics Books, Yves Smith for 2011

"This book is certainly a good read for anyone eager to know why it is urgent that economists come up with a socially useful body of thought or suggestions."—Shanghai Daily

"Entertaining and thought-provoking. . . . [W]orks as a good summary for non-specialists of how the economics debate has developed."—Philip Coggan, Economist

"Quiggin is a writer of great verve who marshals some powerful evidence."—Financial Times (FT Critics Pick 2010)

"Lucid, lively and loaded with hard data, passionate, provocative and . . . persuasive. . . . [Zombie Economics] should be required reading, even for those who aren't Keynesians or Krugmaniacs."—Glenn C. Altschuler, Barron's

"Apparently some economists have a sense of humor, dismal though it may be. Quiggin uses the 2008 global financial crisis as the focal point for examining five core macroeconomic and financial theories that have been—to use zombie terminology—killed by our current predicament. . . . Economics students and interested lay readers will find this valuable."—Library Journal

"Erroneous economic ideas resemble the living dead, writes John Quiggin in his smart new book Zombie Economics. They are dangerous yet impossible to kill. Even after a financial crisis buries them, they survive in our minds and can rise unbidden from the necropolis of ideology."—James Pressley, Bloomberg News

"The financial crisis has disproved many cherished tenets of 'market liberalism', such as the 'Efficient Markets Hypothesis', yet these zombie ideas still shamble through newspapers and journals. Enter economist Quiggin, calmly wielding dual shotguns to blast them relentlessly in the face. . . . As Quiggin explains with elegance, lucidity and deadpan humour, the undead ideas here are interconnected: killing one causes it to knock over another in a sort of zombie-dominoes effect."—Guardian

"Zombie Economics is . . . a highly readable and sobering assessment of the role played by discredited economic ideas in the global financial and economic meltdown of 2008-09. Quiggin delves deeply into the origins and development of all the star culprits so loved by the economic right in recent decades: from the efficient markets hypothesis to privatization and Real Business Cycle Theory. None has stood up to the stern test posed by real markets and economies in crisis. Yet most live on, still featured in many curriculums and advocated by those academics who have staked their careers on them."—Globe & Mail

"It's hard to resist a book called Zombie Economics, and University of Queensland professor John Quiggin makes his tale as compelling as his title. . . . It's the rare read that's both thoughtful and fun."—Biz Ed
"[A]n excellent new book."—Jessica Irvine, Sydney Morning Herald

"I haven't done justice to Quiggin's book, so if you're interested in a readable exposition of the exploits of academic economists over the past 35 years I recommend it highly. It's the story of how economists forgot much of what they knew. Please, guys, don't do that again."—Ross Gittins, Sydney Morning Herald

"As well as exposing how these flawed ideas brought on the global crisis and how they live on, Quiggin offers his view on a new way forward in economic theory. It's time to bury the zombie."—Fiona Capp, The Age

"From the so-called 'great moderation' concept to the implications of the efficient markets hypothesis, Quiggin does an excellent job summarizing each zombie idea and explaining why it is discredited in a simple (but not simplistic) manner."—Choice

"[Cogent] and readable . . ."—The Nation

"Cleverly titled, with a wonderful and very un-academic cartoon cover and written without excessive jargon, Zombie Economics provides an elegant critical introduction and analysis of some of the key ideas of modern economic thought."—Satyajit Das, Naked Capitalism blog

"Put a bullet through the decaying brain of walking-dead economics by reading Quiggin."—Seth Sandronsky, SN&R

"Peppered with humorous quotations, theory and history, Quiggin has assembled a compelling read about the misguided intellectual economic assumptions of the last forty years and also gives possible solutions to our current financial dilemma."—Ted Stamas, Bullfax.com

"I encourage my colleagues in sociology, psychology, and management to read this book and leverage it to lead to a more integrated social science and, perhaps, a more socially aware economic science."—Brent Goldfarb, Administrative Science Quarterly

Barron's
Lucid, lively and loaded with hard data, passionate, provocative and . . . persuasive. . . . [Zombie Economics] should be required reading, even for those who aren't Keynesians or Krugmaniacs.
— Glenn C. Altschuler
Library Journal
Apparently some economists have a sense of humor, dismal though it may be. Quiggin (economics, Univ. of Queensland, Australia) uses the 2008 global financial crisis as the focal point for examining five core macroeconomic and financial theories that have been—to use zombie terminology—killed by our current predicament. These concepts are essentially tenets of free-market economics, which Quiggin refers to as "market liberalism." Each chapter examines the birth, life, and death of an idea and offers suggestions for alternative views, along with extensive reading lists. He covers important territory such as the efficient-markets hypothesis, trickle-down economics, and privatization. Using examples that focus mainly on the United States, the UK, and his native Australia, he draws similar conclusions from markets and economies worldwide, starting with the Great Depression and working his way to the present global financial crisis. VERDICT While this book's title and cover art imply pop economics, its content is considerably more academic. Because the embedded concepts require an understanding of macroeconomics, microeconomics, and finance, Quiggin clues readers in to key theories and concepts without bogging down the text. Economics students and interested lay readers will find this valuable.—Carol J. Elsen, Univ. of Wisconsin-Whitewater
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Product Details

  • ISBN-13: 9780691145822
  • Publisher: Princeton University Press
  • Publication date: 9/13/2010
  • Edition description: New Edition
  • Pages: 216
  • Product dimensions: 6.30 (w) x 9.30 (h) x 1.10 (d)

Meet the Author


John Quiggin is professor of economics at the University of Queensland in Australia.
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Table of Contents

Preface

Introduction 1

Chapter 1 The Great Moderation 5

Birth: Calm after the Storms 8

Life: The Great Risk Shift 13

Death: The Dissenters and Their Vindication 19

Reanimation: A Global Crisis or a Transitory Blip? 30

After the Zombies: Rethinking the Experience of the Twentieth Century 31

Further Reading 34

Chapter 2 The Efficient Markets Hypothesis 35

Birth: From Casino to Calculating Machine 36

Life: Black-Scholes, Bankers, and Bubbles 39

Death: The Crisis of 2008 50

Reanimation: Chicago Revives the Dead 64

After the Zombies: The State and the Market 66

Further Reading 77

Chapter 3 Dynamic Stochastic General Equilibrium 79

Birth: From the Phillips Curve to the NAIRU, and Beyond 83

Life: Rationality and the Representative Agent 106

Death: How Did Economists Get It So Wrong? 110

Reanimation: How Obama Caused the Global Financial Crisis 121

After the Zombies: Toward a Realistic Macroeconomics 123

Further Reading 133

Chapter 4 Trickle-Down Economics 136

Birth: From Supply-side Economics to Dynamic Scoring 138

Life: Excuses for Inequality 146

Death: The Rich Get Richer and the Poor Go Nowhere 152

Reanimation: Mobility without Movement 167

After the Zombies: Economics, Inequality, and Equity 168

Further Reading 172

Chapter 5 Privatization 174

Birth: We Are All Market Liberals Now 178

Life: A Policy in Search of a Rationale 182

Death: Puzzles and Failures 187

Reanimation: Dead for Good? 199

After the Zombies: The Mixed Economy 200

Further Reading 204

Conclusion Economics For The Twenty-First Century 206

Rethinking the Experience of the Twentieth Century 206

A New Approach to Risk and Uncertainty 207

What Is Needed in Economics 210

References 213

Index 229

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Customer Reviews

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Sort by: Showing all of 7 Customer Reviews
  • Posted August 12, 2011

    The Structure of Scientific Revolutions

    John Quiggin in an Australian economist. He made his name in the early 1980s in an esoteric area called decision theory. The Econometrics Society made him a fellow on the basis of this work, a distinguished award. He writes a blog, which has many devoted followers. The book is primarily about macroeconomics, however, which is not his area. Asking Quiggin about macroeconomics is like going to a podiatrist for your headache: it's the wrong end of the body. The chapter on Dynamic Stochastic General Equilibrium modeling (DSGE modeling) is a good example of Quiggin's lack of expertise about modern macroeconomics. He states that one of the oddities about DSGE modeling is the representative agent paradigm. This is an abstraction where the decision making of one representative consumer/worker is taken as a stand-in for the millions of people living in an actual economy. This abstraction was employed in a famous 1982 article by Kydland and Prescott. Finn I. Kydland and Edward C. Prescott justly won the Noble prize in 2004. The stand-in consumer was abandoned in 1994 in important work by the late and great economist S. Rao Aiyagari. Every graduate student in macroeconomics today knows the Aiyagari paradigm. This work is not mentioned in Quiggin. Nor is the celebrated work by Mortensen and Pissarides, done during the late 1980s and early 1990s, on modeling unemployment. Dale T. Mortensen and Christopher A. Pissarides won the 2011 Noble prize for Economics. There has been a flurry of work in macroeconomics embedding the Mortensen and Pissarides framework of unemployment into an Aiyagari/Kydland/Prescott style DSGE model. An early example is the research by David Andolfatto in 1996. Interestingly, Noble Prize winner Paul R. Krugman's latest research with Gauti B. Eggertsson borrows from Aiyagari (they cite it) and is essentially a dynamic general equilibrium model, albeit with a very Keynesian flavor. Quiggin is really out of touch with modern economics. The trouble with Quiggin's book is that to the non-economist his little bit of knowledge will sound authoritative. Like an undergraduate's essay, many of the bits and pieces are indeed correct. But, also like many undergraduate essays, it shows little understanding about modern macroeconomic, just a superficial dropping of names and theories. Beloved Albert Einstein, a hero for scientists, didn't like quantum mechanics and argued against it. Perhaps it was because of the escalation of the mathematics required to understand the quantum world. Some people say that Einstein wasn't good at math. The mathematics in his papers is easy for a modern economist or physicist to understand--look them up on the web. Time has advanced mathematical training among scientists. Anyway, this was one battle Einstein lost. When Keynesians displaced the classical economists in the 1940s, 1950s and 1960s the latter cried out about the mathematics (calculus and statistics) the former used. Keynesians, such as the Noble prize winners John R. Hicks, Lawrence R. Klein and Paul A. Samuelson, were at the forefront of technique in their day. And now it is the displaced Keynesian crying about the new math (dynamic programming, numerical analysis, stochastic processes) used by the neoclassical economists ushered in by the Kydland and Prescott revolution. Maybe the table will be reversed tomorrow. Who knows: if you could forecast this you could be a Noble Prize winner. This is the process of science: New ideas don't come ea

    3 out of 7 people found this review helpful.

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  • Anonymous

    Posted January 21, 2012

    A book all economists should read

    Quiggin successfully writes a book that should become a standard requirement for economic policy classes for at least the next decade. His concise overview of the microeconomic policies that lead to the macroeconomic consequences of the current crisis--deregulation and privatization, in particular--are used to support a thesis aimed squarely at many in the economics profession and the ideologues who love them. As a professional economist myself, I did not necessarily appreciate Quiggin's criticisms, but I do recognize them in the profession. While his descriptions of some models are somewhat oversimplified, they are not so deconstructed that his points are not substantial and clearly made. Modern economics has a challenge before it, and Quiggin makes apparent what that challenge is: start being relevant or we will all be forced to go through another potentially preventable economic crisis.

    1 out of 1 people found this review helpful.

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  • Posted March 2, 2011

    more from this reviewer

    Enlightening tour through the eerie world of defunct yet durable economic theories

    Like the villain in a horror movie, discredited economic theories can return to haunt you. Australian economist John Quiggin claims that some of these ideas - like total privatization, perfectly rational markets and trickle-down policies - nearly destroyed the world's economy, and that they are trying to make one more comeback. In an attempt to drive the final stake through the brain-eating, dead soul of "zombie economics," he knifes through the five most dangerous principles of "market liberalism." With no apparent fear of being controversial, he presents a compelling case as to why each of those "zombie ideas" failed and describes a new, alternative approach, melding the best of free-market capitalism with judicious use of government involvement to address crucial social needs. Quiggin heavily annotates his work and provides a thoughtfully researched bibliography. Though the economic jargon can, at times, slow your progress, Quiggin's book rewards your persistence. getAbstract recommends this eerie tour through defunct yet durable economics to anyone who enjoys a good scare. Find your silver bullets, construct your booby traps and carry your axes for good measure: Quiggin says it is high time to kill those zombies once and for all.

    1 out of 2 people found this review helpful.

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  • Posted November 20, 2010

    Strongly recommended--for thinking folks.

    Quiggin writes entertainly, so that the reading is smooth and fun, even if the content should alarm you. If you've believed that economics was the boring science--prepare to be surprised and enlightened. After reading this book, not only will you have much more economic theory in the palm of your hand, you'll also have acquired healthy skepticism about "conventional wisdom," plus some facts to argue with.

    A good read, and one you won't feel you've wasted an evening on!

    1 out of 2 people found this review helpful.

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  • Posted May 16, 2011

    more from this reviewer

    Well researched

    I found this book both informative and well researched. Quiggin has done his homework when making the claims that he does. It can be rather dry at times, especially if you are not familir with a specific economic theory that he discusses.

    0 out of 3 people found this review helpful.

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  • Anonymous

    Posted June 3, 2011

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    Posted April 22, 2013

    No text was provided for this review.

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