Economics @ ITT

Reality Economics

Posted in economics by ittecon on December 20, 2012

I’ve got to read Economists and the Powerful.

Today’s supply and demand approach treats the economy as a “market” in a crudely abstract way, as quantities of goods (already produced), labor (with a given productivity) and capital (already accumulated, no questions asked) are swapped and bartered with each other. This approach does not inquire deeply into how some people get the capital to “swap” for “labor.” To top matters, this approach gets the direction of technological growth and basic business experience wrong, by assuming conditions of diminishing returns and diminishing marginal utility. The intellectual result is a parallel universe, whose criterion for economic excellence is merely the internal consistency of its abstract assumptions, not their realism.

via Reality economics | Michael Hudson.

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