This post could go in several threads, but it fits here.
Graeber reviews Skidelsky at nyrb: economics is no longer fit for purpose
"beginning to look like a science designed to solve problems that no longer exist."
"We now live in a different economic universe than we did before the crash. Falling unemployment no longer drives up wages. Printing money does not cause inflation. Yet the language of public debate, and the wisdom conveyed in economic textbooks, remain almost entirely unchanged."
"There are plenty of magic money trees in Britain, as there are in any developed economy. They are called “banks.” "
"an astounding 85 percent of members of Parliament had no idea where money really came from (most appeared to be under the impression that it was produced by the Royal Mint). "
"The one thing it never seemed to occur to anyone to do was to get a job at a bank, and find out what actually happens when someone asks to borrow money. In 2014 a German economist named Richard Werner did exactly that, and discovered that, in fact, loan officers do not check their existing funds, reserves, or anything else. They simply create money out of thin air, or, as he preferred to put it, “fairy dust.”"
"demanding that the technocrats charged with running the system base all policy decisions on false assumptions about something as elementary as the nature of money becomes a little like demanding that architects proceed on the understanding that the square root of 47 is actually π."
"the Bank of England (the British equivalent of the Federal Reserve, whose economists are most free to speak their minds since they are not formally part of the government) rolled out an elaborate official report called “Money Creation in the Modern Economy,” replete with videos and animations, making the same point: existing economics textbooks, and particularly the reigning monetarist orthodoxy, are wrong. The heterodox economists are right. Private banks create money. Central banks like the Bank of England create money as well, but monetarists are entirely wrong to insist that their proper function is to control the money supply. In fact, central banks do not in any sense control the money supply"
"Central banks in Norway, Switzerland, and Germany quickly put out similar papers. Back in the UK, the immediate media response was simply silence. The Bank of England report has never, to my knowledge, been so much as mentioned on the BBC or any other TV news outlet. Newspaper columnists continued to write as if monetarism was self-evidently correct. Politicians continued to be grilled about where they would find the cash for social programs. It was as if a kind of entente cordiale had been established, in which the technocrats would be allowed to live in one theoretical universe, while politicians and news commentators would continue to exist in an entirely different one."
"it would be unwise to ignore the possibility that something historic is afoot."
"Accordingly, one of the most significant books to come out of the UK in recent years would have to be Robert Skidelsky’s Money and Government: The Past and Future of Economics. Ostensibly an attempt to answer the question of why mainstream economics rendered itself so useless in the years immediately before and after the crisis of 2008, it is really an attempt to retell the history of the economic discipline through a consideration of the two things—money and government—that most economists least like to talk about."
"Is money best conceived of as a physical commodity, a precious substance used to facilitate exchange, or is it better to see money primarily as a credit, a bookkeeping method or circulating IOU—in any case, a social arrangement? This is an argument that has been going on in some form for thousands of years. What we call “money” is always a mixture of both"
"According to Skidelsky, the pattern was to repeat itself again and again, in 1797, the 1840s, the 1890s, and, ultimately, the late 1970s and early 1980s, with Thatcher and Reagan’s (in each case brief) adoption of monetarism. Always we see the same sequence of events:
(1) The government adopts hard-money policies as a matter of principle.
(2) Disaster ensues.
(3) The government quietly abandons hard-money policies.
(4) The economy recovers.
(5) Hard-money philosophy nonetheless becomes, or is reinforced as, simple universal common sense. "
"How was it possible to justify such a remarkable string of failures? Here a lot of the blame, according to Skidelsky, can be laid at the feet of the Scottish philosopher David Hume. "
"there’s absolutely no reason a modern state should fund itself primarily by appropriating a proportion of each citizen’s earnings. There are plenty of other ways to go about it. Many—such as land, wealth, commercial, or consumer taxes (any of which can be made more or less progressive)—are considerably more efficient, since creating a bureaucratic apparatus capable of monitoring citizens’ personal affairs to the degree required by an income tax system is itself enormously expensive. But this misses the real point: income tax is supposed to be intrusive and exasperating. It is meant to feel at least a little bit unfair. Like so much of classical liberalism (and contemporary neoliberalism), it is an ingenious political sleight of hand—an expansion of the bureaucratic state that also allows its leaders to pretend to advocate for small government."
“lunatic premises lead to mad conclusions”
"we were obliged to pretend that markets could not, by definition, be wrong"
"There is a paradox here. On the one hand, the theory says that there is no point in trying to profit from speculation, because shares are always correctly priced and their movements cannot be predicted. But on the other hand, if investors did not try to profit, the market would not be efficient because there would be no self-correcting mechanism….
Secondly, if shares are always correctly priced, bubbles and crises cannot be generated by the market….
This attitude leached into policy: “government officials, starting with [Federal Reserve Chairman] Alan Greenspan, were unwilling to burst the bubble precisely because they were unwilling to even judge that it was a bubble.” The EMH [Efficient Market Hypothesis] made the identification of bubbles impossible because it ruled them out a priori. "
"After such a catastrophic embarrassment, orthodox economists fell back on their strong suit—academic politics and institutional power"
"If an “economy” is to be defined as the means by which a human population provides itself with its material needs, the British economy is increasingly dysfunctional. Frenetic efforts on the part of the British political class to change the subject (Brexit) can hardly go on forever. Eventually, real issues will have to be addressed."
https://www.nybooks.com/articles/2019/12/05/against-economics/sidd
