The premise of this book is that the internal inconsistencies between economic theories – the apparently unresolvable debates between leading economists and the incoherent policies of our governments – are symptomatic of economics being in a crisis. Specifically, in a scientific crisis.
The good news is that, thanks to the work of scientist and philosopher Thomas Kuhn, we know what needs to be done to fix a scientific crisis. Moreover, there are two scientists in particular whose ideas could show how to do this for economics: Charles Darwin, the man who discovered evolution, and William Harvey, doctor to King Charles I and the first man to understand blood flow and the workings of the human heart.
In Money, Blood and Revolution, bestselling financial writer George Cooper explains how the ideas of Darwin and Harvey could revolutionise economics, making it more scientific and understandable, and might even reveal the true origin of economic growth and inequality.
– By recognising that our theories define our observations, he explained that the story we tell ourselves about the way the world works can dominate and
define our observations of the world…. According to Kuhn, you just don’t get to the breakthrough through ever-closer inspection of the data using the old
– The breakthroughs did not involve any new observations – rather, they involved reinterpretations.
– as (Thomas) kuhn said when theories break down
i- discreapancies accumulate where theories dont fit the reality or cant explain it as they assume they can and be predictive
ii- fixes are sought in the old theories not in new ones, hence many splinter factions are formed with their ad hoc solutions to the problems
iii- revolution new theory is proposed which combines the best of the old and itegrates the new
iv- rejection by the old guard of the new theory
v – old gaurd dies out and new gaurd take up ideas, typically the new gaurd are non experts, (aka bloggers, thought leaders etc not the economists of old)
– a theory will never be rejected till a new theory is out there that can replace it / dont critise old ideas, find better ones, wait 30 years to take hold
– axioms are the foundations of a theory, like the air we breath has H20
– Both men resisted the idea that science could progress through intuitive leaps, insisting that progress was only permissible if it resulted from making
ever more measurements. Reid, like Owen, was again demanding: work harder like Spock, not smarter like Kirk.
– there needs to be a story to explain how the conclusion came to be the way it is otherwise people wont believe it
– Today’s dominant school of economics is also a static equilibrium paradigm. Like astronomy had its stationary earth, medicine its equilibrium of the
humours , biology its immutable species, and geology its solid earth with immovable continents.
– Many of the important schools of economics operate unscientifically in that they do not attempt to model the real economy, but rather advocate reforming
the real economy to conform to their own models.
-In economics it is not important what the great economists actually said, what matters is what their followers today believe that they said.
– Neoclassical can be boiled down to the Three Axioms:
i- Individualism: people make their decisions independently of one another based on their own self-interest.
ii- Maximisation: the decisions made by individuals are always designed to maximise their own welfare.
iii- Equilibrium: the result of all of these individual optimising decisions is a stable system in optimal equilibrium.
– The neoclassical school is a framework for understanding the behaviour of self-interested individuals. In a modern developed economy, roughly half of the
economic activity is due to the government; but there is no government in the basic neoclassical framework.
– Terms, in the neoclassical maximisation world, entrepreneurs are all attempting to accumulate the maximum possible amount of money. In a competitive
world, on the other hand, entrepreneurs are all attempting to accumulate more money than each other.
– When a measure becomes a target it ceases to become a measure.
– As we could not compete on the output of the system – that is, the rewards – we would naturally start to compete on the inputs, the work. The only way to
gain a competitive upper hand relative to our peers would be to receive the same fixed benefit for a lower amount of work. In this way we would at least
enjoy a greater benefit per unit of work. Of course, the result would be a race to the bottom, with everyone competing to do less than each other