How the Economy Works

How the Economy Works

Confidence, Crashes and Self-fulfilling Prophecies

Book - 2010
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"Of all the economic bubbles that have been pricked," the editors of The Economist recently observed, "few have burst more spectacularly than the reputation of economics itself." Indeed, the financial crisis that crested in 2008 destroyed the credibility of the economic thinking that hadguided policymakers for a generation. But what will take its place?In How the Economy Works, one of our leading economists provides a jargon-free exploration of the current crisis, offering a powerful argument for how economics must change to get us out of it. Roger E. A. Farmer traces the swings between classical and Keynesian economics since the early twentiethcentury, gracefully explaining the elements of both theories. During the Great Depression, Keynes challenged the longstanding idea that an economy was a self-correcting mechanism; but his school gave way to a resurgence of classical economics in the 1970s - a rise that ended with the current crisis.Rather than simply allowing the pendulum to swing back, Farmer writes, we must synthesize the two. From classical economics, he takes the idea that a sound theory must explain how individuals behave - how our collective choices shape the economy. From Keynesian economics, he adopts the principlethat markets do not always work well, that capitalism needs some guidance. The goal, he writes, is to correct the excesses of a free-market economy without stifling entrepreneurship and instituting central planning.Recent events have shown that we cannot afford to treat economics as an ivory-tower abstraction. It has a direct impact on our lives by guiding regulators and policymakers as they make decisions with far-reaching practical consequences. Written in clear, accessible language, How the Economy Worksmakes an argument that no one should ignore.
Publisher: New York, NY : Oxford University Press, 2010
Characteristics: xiv, 193 p. : ill. ; 22 cm
ISBN: 9780195397918 (cloth : alk. paper)
Call Number: 339 FARMER


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Oct 16, 2013

Everyone, before ever picking up this book, should first read Ellen Brown's "Web of Debt" and also a book by Derber and Magrass, "The Surplus American." Then you will be forearmed to deal with this book, which fundamentally ignores finance and global finance! This book, and so many other faux economics books and articles today, reminds me of just how fantasy-strewn the public discussion is: a non-existent Nobel Prize for Economics is frequently awarded, for nonexistent work. (If you believe a Nobel Prize for Economics exists, simply contact the Nobel family and inquire if any of their members ever endowed such a prize, and if any of their family supports or recognizes such a prize? Negative reponses to both questions are guaranteed. Also important, why do they continue to award it for non-existent work? The recent "Nobel Prize" is for a paper explaining the efficacy of indexes over stock picking - - yet if one understands the "internalization" business, one realizes there is no actual stock picking - - at least on the public or retail side - - taking place?) Book rated farce. Previous awards to Stiglitz (asymmetric information) realize it was for nothing as the financial markets are so rigged, and similarly for Krugman's award a few years back.


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