The Death of Economics

by Paul Ormerod

Book Overview

"Important and ingenious . . . ought to be read by every educated person." --The Spectator.

Renowned British economist Paul Ormerod explodes current economic theory to offer a radical new framework for understanding how human societies and economies really operate. His bold and impassioned arguments about how and why economics should be recast to reflect the current ills of Western society --including unemployment, crime, and poverty --are both...

• Format: Paperback
• Language: English
• ISBN: 0471180009
• ISBN13: 9780471180005
• Release Date: August 1997
• Publisher: Wiley
• Length: 240 Pages
• Weight: 0.75 lbs.
• Dimensions: 0.7" x 6.0" x 9.1"

Customer Reviews

Excellent book, from an Excellent Writer

Crucial reading for the concerned citizen. The book ought to be read by every educated person, concerning that it is very timely especially now with the crisis.

Towards a reappraisal of formal economics

Given all of the existing reviews I have little to add really. Mind you, given all of the verbiage going around about the global economic crisis and the differing views which pervade the media, I find it particularly interesting that some of the reviews propagate the view that economics is not in crisis. It reminds me of Thomas Kuhn's proposition The Structure of Scientific Revolutionsabout those engaged in solving puzzles just before a paradigm shift. In this time, given the failure of much economic theory to predict the crisis, it is surely right to look at alternative prospectuses. Ormerod provides a well written book accessible to the educated general reader which provides insight into some of the deficencies of formal economics and some possible alternatives. Many of the existing reviews seem to be written by those who have already taken a position in the debate. The trouble is the debate has moved far beyond the boundaries of academia and is of particular interest to those who have lost jobs and homes.

a book for all economics-students to read

The book argues that the study of Economics has diverted from its true path and is following a path of a quasi-physical science, by increasingly relying on a mathematical framework, rather than observation and innovative thinking, as basis for theory. In other words, economics has become an unreliable science that promises alot on paper but presents little substance in practice. As one very convincing argument, he uses the bad track-record that economical forecasts have. Economical forecasts are not accurate and reliable when it really matters, he argues. He makes a valid argument: if it had been a physical science such as chemistry making such bad predictions then the methodology used would have been scrutinized and questioned, but not in Economics it seems. Another good point is the fact that IMF and the World Bank, where many of the worlds most prominent economists hold seat, continuously make seriously bad recommendations that may look good in their theoretical models but work very poorly in practice. This showcases the bad situation that the application of modern economic analysis finds itself in. My humble interpretation of the book, is that it argues that economics as a field of study should return to its roots as a social science, and focus more on studies that explain the behavior of People - such as behavioral psychology and sociology - rather than focus entirely on mathematics. To me that is a valid point to make. After all, economic systems are not Physical systems but Social systems: the functions of gravity and thermodynamics do not depend on what we humans think and do, in stark contrast the function of economic systems does depend on human behavior. It is also true that "hard" or factual data are indeed produced, in the financial markets for example, and this is where mathematics and statistics are practical in answering questions like "How Much ?". But what the book seems to argue is that the use of mathematics to explain "Why ?" is wrong, because what is being examined is human behavior, which is better explained through psychology than mathematical models. I first read this book as an undergraduate majoring in economics. After reading this book I initially became very depressed and questioned my choice of majoring in Economics. It was a rude awakening, like someone waking you up by throwing a bucket of cold water over you. This book has converted me, I used to believe that mathematics was the answers to everything. But now I realize that the most important thing is the ability to think in an applied manner, creatively. After all, the modern study of economics, as founded by such men as Adam Smith, had an applied purpose in mind, a practical use. This is why I decided to do my masters in applied economics, as it is in applied economics that I believe economics can be a science that leads to practical outcomes. As a final note, the dystopia Omerod presents is not unwarranted: I was shocked when I recently read that,

Economic forecasting is bunk

Though this book is from 1997, it is still timely. What I enjoyed most was the discussion on economic forecasting: the most accurate way to forecast is to predict that the future will be like the past. This gets progressively more accurate as the time being predicted gets closer to the time the prediction is made (next month's forecast is better than next year's forecast). Pretty much anybody can make economic predictions this way that are as good as the experts'. No economic model has been shown to give better results than this. The weakness of this approach, of course, is that when external shocks occur in an economy, such "forecasting" is completely useless. But such external shocks are very common. This section alone is worth the price of the book. If the book has a flaw, I would consider that it is overly optimistic about the future of the economy. In my opinion, the problem with mainstream economics is not only that it is unable to make meaningful forecasts; often it cannot accurately report what the economy is really doing NOW. In this respect economic forecasts are in a far worse position than weather forecasting; we can, after all, agree pretty reliably on whether or not it is raining now. Economics has not come this far. Economic growth is generally measured by GDP, but this is a highly flawed measure; it does not count any effects of population growth, or decline in living standards, or costs of pollution, or depletion of natural resources. The book could use a mention of the Index of Sustainable Economic Welfare (ISEW) or other more accurate economic measures. Ormerod is correct that the Sherman Act is central to improvements in economic science. This is the subject of my own research in economics, so I will not discuss it further here. Ormerod's comments on inflation and unemployment are very good. However, I think he misses that both inflation and unemployment are very peculiar concepts. Inflation measures are essentially rigged to disguise many real changes in living standards, as well as changes in the cost of consumer goods vs. the cost of housing or services. Unemployment depends greatly on what is perceived as the minimal standard of living in a particular country for a particular person. If a job does not pay enough to meet that minimal standard of living, the person must keep looking; but what is considered a minimal standard of living can vary enormously by country, by social class, etc. Minimal standards of living are also often highly regulated, by such things as zoning and building codes. Overall, though, a fascinating book guaranteed to make you think.

Answers the Question why Economics Got Boring

The study of how to allocate scare resources should interest loads of people. In fact, most people who haven't studied economics in college seem fasinated by the idea. However, because of the way most Economics are taught in College, most people who have studied Economics want nothing to do with it. I know many intelligent people who hated Economics in college and have steared clear of economics every sense. This is a is the sorry state of Economics that has to die as Paul so clearly writes about in his book. I don't think, however, that the orginal intention of economics, the study of how to allocate scarce resources will ever die. His book, about its death really gives me hope that Economics will come alive again someday once we rid economics of all the ego driven, engineering models, that bore people to death of economics.