Book Review – Peter Warburton
Capitalism’s toxic assumptions – Redefining next generation economics
Eve Poole is a force to be reckoned with, as any who have sparred with her will attest. Unsurprisingly, this book is bursting with energy and ideas, taking the argument to the bastions of capitalism in the corporate, financial and public spheres and proposing some radical shifts of thinking and emphasis.
The twin targets of her onslaught are liberal economics and market capitalism. While the seven toxic assumptions are attributed to market capitalism, Eve takes the economics profession to task for an anachronistic attachment to the ideas of Adam Smith and a failure to engage in an analogous journey of empirical discovery to that of science. “In science, temporary hypotheses – or potentially toxic assumptions – have always been seen as the necessary roads to progress.” “Not so, however, in the ‘science’ of economic theory, where old assumptions seem to have assumed the role of precious artefacts, to be protected and even venerated in perpetuity” (p.9).
Truth be told, liberal economics, with its focus on atomistic competition and a unique equilibrium, has had a good kicking for the past 20 years. Paul Ormerod wrote The Death of Economics in 1994; Steve Keen wrote De-bunking Economics in 2001; Richard Werner wrote New paradigm in macroeconomics, set in the particular context of Japan’s stagnation, in 2005. A final example, written by physicist Mark Buchanan, is Forecast, published in 2013. Buchanan berates economists for their laziness in failing to learn lessons from physics, meteorology and the natural sciences about the behaviour of simple feedback mechanisms, let alone complex dynamic systems.
Eve throws down seven challenges to market capitalism, some relating directly to the critique of liberal economics and others to institutional arrangements and management…