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Palgrave Macmillan

Uneconomic Economics and the Crisis of the Model World

ISBN 9781137385482
Publication Date January 2014
Formats Hardcover Ebook (EPUB) Ebook (PDF) 
Publisher Palgrave Pivot
Series Building a Sustainable Recovery: SPERI Research & Policy

Matthew Watson analyses the political response to imploding markets through the lens of the history of thought, asking 'what has gone wrong with economics?' against the backdrop of the global financial crisis. The most important historical trend, he suggests, is the development of an 'uneconomic economics' whereby attention is placed on explaining relationships in perfectly efficient blackboard markets rather than the much more chaotic institutions encountered in everyday economic interactions. Economists now routinely devise highly sophisticated abstract models which are theoretically rigorous but fail to capture the way businesses are actually undertaken. The acknowledgement of a gap between models and the real world has led many commentators to initially pronounce that the financial crisis was equally a crisis of economics. The author shows, though, that the subsequent redefinition of the crisis as a problem of over-extended state spending has successfully rehabilitated the model world of orthodox economics opinion.

Matthew Watson is Professor of Political Economy in the Department of Politics and International Studies at the University of Warwick, UK. Since 2013 he is also an ESRC Professorial Fellow working on the project 'Rethinking the Market'. In his research he applies methodologies from the history of thought in order to understand how modern-day markets take their distinctive form.

Acknowledgements
List of Abbreviations
1. Setting the Scene: From a Crisis of Economics to a Crisis of the State
Introduction
Competing Crisis Narratives of Symptom and Disease
The Rehabilitation of Economic Theory
The Crisis and the Economics Curriculum
Structure of the Boo
2. The Collapse of the Model World: From Faith in Equations to Unsustainable Asset Bubbles
Introduction
The Growth of Increasingly Complex Secondary Mortgage Markets
The Uneconomic Economics of Asset-Price Valuation Techniques
Performativity and Counter-Performativity in Financial Markets
Conclusion
3. The Creation of the Model World: From Formalist Techniques to the Triumph of Uneconomic Economics
Introduction
The Return of the Policy Ineffectiveness Proposition
The Quest for a Fully Specified General Equilibrium Framework
Formalist Technique and the Logic of Market Self-Regulation
Conclusion
4. Looking Ahead: From Uneconomic Economics to a Different Future
Introduction
The Definition of Good Economics
The Significance of Historicised Method
Final Words
References
Index

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