‘Classical Economic Theory and the Modern Economy’ cover text comments, thoughts and suggestions sought

You may have noticed my lack of regard for modern economic theory which the following might help you understand more clearly. This is the draft of the cover text for the book I have just completed and sent off to the publisher. Comments, thoughts and suggestions would be welcome. My disdain for Keynesian economics I have discussed on many occasions. My attitude to “marginal” analysis I mention far less often which is why certain passages below are highlighted in bold.

‘Classical Economic Theory and the Modern Economy’

The book starts with two premises: First, that economic theory reached its deepest level of understanding in the writings of John Stuart Mill and the classical economists of his time, and then, secondly, the author of this book has understood Mill and has accurately explained what the classical school of the late nineteenth century wrote. From these premises, this then follows.

If you are to have any hope of understanding how an economy works, and how modern economic theory became the dead end it has become, you will need to read this book.

The classical economists, and John Stuart Mill in particular, lived through the Industrial Revolution, saw its astonishing economic transformation before their eyes, and explained, so others could understand for themselves, how their prosperity had been created through the emergence of the market economy.

Mill, the greatest utilitarian philosopher of his age, refused to use utility as part of his theory of value. Mill explicitly and emphatically denied any role for aggregate demand in the creation of employment. In reaching these conclusions, there was no disagreement among the entire mainstream economics community of his time.

First through the Marginal Revolution of the 1870s, and then through the Keynesian Revolution of the 1930s, the entire edifice of classical theory has been obliterated. From a classical perspective, modern economic theory is Mercantilist trash nonsense. If you are interested in how economic theory became the wasteland it has become, and wish to understand the classical theory no one any longer has the slightest clue about, this is the book you must read.

If you are interested in understanding all this more completely, you will have to read the entire book when it is finally published sometime this year.

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25 Responses to ‘Classical Economic Theory and the Modern Economy’ cover text comments, thoughts and suggestions sought

  1. Entropy

    Fir some reason I am picturing Peter O’Toole ax Lawrence of Arabia shouting “No Prisoners!

  2. Sinclair Davidson

    Hmmmmmm. There is a huge leap from arguing that utility shouldn’t be a part of valuation theory (Mill is almost certainly wrong on this point) to suggesting that aggregate demand is a poor concept and aggregate demand shocks don’t drive the business cycle or explain recessions.

    Yes. I know. Wait for the book to reveal all.

  3. Entropy

    There are many non financial reasons why people make and buy stuff.

  4. Sinclair Davidson

    There are many non financial reasons why people make and buy stuff.

    Like, um, utility? 🙂

  5. John A

    Sinclair Davidson #3282221, posted on January 5, 2020, at 1:32 pm

    There are many non-financial reasons why people make and buy stuff.

    Like, um, utility? 🙂

    Now, define “utility” to reflect those non-financial reasons …

  6. John A

    and you will be indignant err, perplexed, too, I vow!

  7. Entropy

    Well some people like the utility of an mx-5 whereas others like the utility of a similar priced SUV. Does the dollar values of each, the differences between them, or the price difference to some Chinese shitbox city car reflect the differences in utility?
    That is why it is dangerous to attempt values for utility.

  8. Gerry

    This sentence needs to be the take home message, not lost in the script.

    “If you are to have any hope of understanding how an economy works, and how modern economic theory became the dead end it has become, you will need to read this book.”

  9. Leo G

    Fir some reason I am picturing Peter O’Toole ax Lawrence of Arabia shouting “No Prisoners!

    Lawrence did cop a caning from one critic, though, before he’d even published.

  10. Sinclair Davidson

    Now, define “utility” to reflect those non-financial reasons …

    The satisfaction of a job well done.
    The joy of working.
    The delight from owning an art piece.

  11. Russell

    Like beauty, utility is in the eye of the beholder. Which means utility doesn’t exist on its own but is created by beholders. To be a beholder, you have to pay attention. Advertising and media draws attention to utility. Competing utilities are totally dependent on eyeballs. In the modern disrupted and FOMO world, we are at peak-eyeball-connection. Classical utility has therefore changed into another phase. Stuff is acquired and discarded at increasing and irrational rates with little regard to anti-utility (waste).
    Classical economics is sort of like Newtonian physics after Quantum physics cut in. Nothing wrong there at normal speeds but as you approach the speed of light …

  12. Leo G

    Classical economics is sort of like Newtonian physics after Quantum physics cut in. Nothing wrong there at normal speeds but as you approach the speed of light …

    Modern physics is sort of like people with multiple personality disorder. Relativity and quantum mechanics involve fundamentally incompatible models of reality.
    Modern economics on the other hand involves modelling the group behaviour of disordered multiple pesonalities in pursuing their needs and wants. Reality barely enters into it.

  13. Entropy

    Anyhoo, a discussion of the detail of the origins of utility on the dust cover is probably a distraction. The cover text might be better focussed on how explaining how the book will demonstrate how classical economics provides the explanations as to why Keynesian demand driven approaches fail to fix economies, albeit being good for votes at the same time.

  14. Simple Simon

    You seem to want to pitch the book at the educated general reader. With that in mind might I proffer the following.

    Comments:
    (1) The first para buries what should be the lead without adding value.

    (2) The draft is too wordy and tries to cover too much, leading to diffusion of the message and impact.

    Suggestion:
    Redraft along the lines of the following –

    ‘Classical Economic Theory and the Modern Economy’

    If you are to have any hope of understanding how an economy works, and how modern economic theory became the dead end it has, you will need to read this book.

    The classical economists, and John Stuart Mill in particular, lived through the Industrial Revolution, saw its astonishing economic transformation before their eyes, and explained, so others could understand for themselves, how their prosperity had been created through the emergence of the market economy.

    Through the Marginal Revolution of the 1870s, and the Keynesian Revolution of the 1930s, the entire edifice of classical theory has been discarded. From a classical perspective, modern economic theory is Mercantilist nonsense. If you are interested in understanding how economics became the wasteland it is today, this is the book you need.

  15. Tim Neilson

    Not disagreeing with anything you’ve written Steve, but in the modern world a cover text that long will get a lot of “TL,DR”.

    The cover needs to be something much briefer, along the lines of:

    “Have you ever wondered why, after well over a decade of post-GFC government funded “stimulus”, lower interest rates, quantitative easing etc., all with the approval of the most acclaimed economic minds in the world, most economies are still mired in their own excrement?
    This book explains it.”

  16. Paul

    I will happily read it if it is reasonably priced.

  17. Nob

    Gonna be on Kindle?

    That’s what I would call utility.

  18. Tel

    After two world wars, technological takeover of most industries and government departments busy writing regulations, transferring wealth, subsidizing this and taxing that. We aren’t in a classical economy anymore.

    Classical economics is sort of like Newtonian physics after Quantum physics cut in. Nothing wrong there at normal speeds but as you approach the speed of light …

    Presuming we are talking about the Australian economy, there’s little chance it will approach the speed of a lumbering turtle, so worrying about what happens at the speed of light might be a bit hypothetical.

    But yeah, a theory that explains what happens when an economy contains mostly distortions and not very much of anything “economical” has yet to be written. We are really living in a technological version of the corporatist state, and the theory doesn’t cover that. Mises said that it would never work and fall apart at an accelerating rate but so far it hasn’t.

  19. Arky

    The delight from owning an art piece.

    ..
    That is the opposite of utility.
    That is a state of mind.
    If it is the state of mind you are after, then there are more economical ways to obtain it.
    Such as medication.
    For example, you could delight in paying a modern artist $500 000 to tape a banana to your wall, or you could pay $50 bucks for the appropriate medication.

  20. Arky

    In fact, referencing a feeling as a utility indicates a divorce from reality.
    The confusion comes in because utility is about need, not want.
    But in a thriving consumer society many people’s needs depend on satisfying the desires of others.
    But desire still is not utility.

  21. Arky

    Or in other words: there is no utility in taping a banana to a wall for the person buying the taped banana.
    But there is a whole heap of utility to the “artist” in convincing someone that taping a banana to the wall is worth $500 000.

  22. Arky

    This may seem a trivial point to take up.
    But it is the error here that flows through to corrupt everything.
    The post- modern relativism that says: “Well if someone is willing to pay for a banana taped to the wall then who am I to say it is worthless”? When in fact, in and of itself the banana has negative value. It has negative utility. If I came into your home and taped a banana to the wall you would have to use time and resources to remove it before it rotted and damaged your property.
    In and of itself and divorced from the bullshit used to market it to idiots, the banana is less than useless.
    As opposed to say. a power grid. Which as the name “utility” implies, has utility. Overall, and without lying or bullshitting, it’s existence makes the place better. The same with a whole range of goods and services that without resorting to relativism or bullshit, are useful.
    Even down to the colourful packaging on cereal boxes. That are indeed marketing and bullshit, but of a useful kind that help millions of people pick out the cereal they like to eat.
    It is this relativism that leads libertarians and other slobs to look at a situation, say, where a woman prostitutes herself to some loser in order to buy heroin, and instead of seeing clearly, they see a series of free transactions in a market. A positive benefit to all involved. A free exchange of goods and services, and who are we in our libertarian moral relativism to see anything but a benefit?
    But anyone grounded in reality sees it differently: the woman is damaged and addicted and should be treated. The drug dealer is a criminal who if not involved in the drug trade would be doing something else as equally hideous. And the loser paying for it should sort his shit out and start dating.
    Unencumbered by the stupidity of relativism, we can see that overall the drug and prostitution trades have no utility, and in fact in terms of disease and oportunity loss, are of negative utility, even to those buying the goods and services involved, as well as to society as a whole.

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