Saturday, August 04, 2007

New paradigm in economics needed?

Since early this year there have been increasing reports of distress in the US housing markets as more people lost their homes. In the UK too, home repossessions are up 30% on last year. The credit malaise is spreading so that some international blockbuster deals to buy out mammoth size firms with private money are in trouble. Supplies of credit are getting tight at this cutting edge of business that has had such a heyday for some years.

To understand what is happening it is most enlightening to read Richard Werner’s book New Paradigm in Macroeconomics ISBN 1403920745. (See the review on ). The book clarifies what seemed so puzzling as to why Japan boomed to the early 1990’s, then suddenly crashed and seems to have been mostly in the economic doldrums since. Werner is the Professor of International Banking at the University of Southampton and has studied the Japanese economy first hand. His book is written to prove certain things to economists, but, apart from the formulaic proofs for the specialists, its clarity makes it very accessible to anyone else. It is a fundamentally important book that explains the reasons for the boom and bust nature of our western economy which leads to such things as housing price bubbles, volatile employment patterns and widening disparities of personal wealth.

Werner shows how much of the underlying thinking behind current neoclassical economics is remote from practical reality. He exposes the realities of ‘the market’ and how they do not match up to the expectations of theorists who nevertheless take the idea as holy writ. He suggests that the prevailing wisdom of current economics favours the established economies of the world to the detriment of those of developing nations that are at the mercy of the false paradigms peddled by the strong for their own purposes. The book strengthens the case for key points made in book The Free Lunch – Freedom with Fairness. See

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