Chapter 1 - Fakeconomics and Economics

Summary

This paper, then, is a serious analysis of a ridiculous subject, which is of course the opposite of what is usual in economics.

(Paul Krugman)

Do not be alarmed by simplification, complexity is often a device for claiming sophistication, or for evading simple truths.

(John Kenneth Galbraith)

Idolatry of Competition

From tiny acorns great oaks grow. In a case of dogma imitating nature, from low and banal theory mainstream economists ascend to extreme ideological heights. With superficial and simplistic propositions the economics mainstream constructs a great and complex ideological edifice from which it issues oracle-like judgments over the affairs of humankind (see Box: The Construction of Nonsense). The employment, inflation and antigovernment parables of the current mainstream derive from a shortlist of putatively incontestable propositions which can be found in almost all introductory, and many advanced, textbooks:

1. Desires and preferences are unique to each person;

2. on the basis of these desires and preferences people enter into exchanges of their free will, seeking to satisfy themselves through market exchanges with other people;

3. these market activities, including the exchange of a person's capacity to work, are to obtain the income to buy the goods and services dictated by the person's desires and preferences;

4. many people seeking simultaneously to buy and sell generates competition; and this competition ensures that people buy and sell at prices that are socially beneficial;

5. action by any collective or individual authority, private or public, that restricts the potential for people to buy and sell reduces the social benefits generated by markets;[…]