Zombie Economics: How Dead Ideas Still Walk among Usby John Quiggin
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
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.
In a new chapter, Quiggin brings the book up to date with a discussion of the re-emergence of pre-Keynesian ideas about austerity and balanced budgets as a response to recession.
Glenn C. Altschuler
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 beento use zombie terminologykilled 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
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Andrew Leigh, Australian National University
Yves Smith, author of "ECONned: How Unenlightened Self-Interest Undermined Democracy and Corrupted Capitalism"
Mark Thoma, University of Oregon
Brad DeLong, University of California, Berkeley
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John Quiggin is professor of economics at the University of Queensland in Australia.
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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.
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.
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!
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
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.