Matthew Watson analyses the political response to imploding markets through the lens of the history of thought, asking 'what has gone wrong with economics?' against the backdrop of the global financial crisis. The most important historical trend, he suggests, is the development of an 'uneconomic economics' whereby attention is placed on explaining relationships in perfectly efficient blackboard markets rather than the much more chaotic institutions encountered in everyday economic interactions. Economists now routinely devise highly sophisticated abstract models which are theoretically rigorous but fail to capture the way businesses are actually undertaken. The acknowledgement of a gap between models and the real world has led many commentators to initially pronounce that the financial crisis was equally a crisis of economics. The author shows, though, that the subsequent redefinition of the crisis as a problem of over-extended state spending has successfully rehabilitated the model world of orthodox economics opinion.
Acknowledgements List of Abbreviations 1. Setting the Scene: From a Crisis of Economics to a Crisis of the State Introduction Competing Crisis Narratives of Symptom and Disease The Rehabilitation of Economic Theory The Crisis and the Economics Curriculum Structure of the Boo 2. The Collapse of the Model World: From Faith in Equations to Unsustainable Asset Bubbles Introduction The Growth of Increasingly Complex Secondary Mortgage Markets The Uneconomic Economics of Asset-Price Valuation Techniques Performativity and Counter-Performativity in Financial Markets Conclusion 3. The Creation of the Model World: From Formalist Techniques to the Triumph of Uneconomic Economics Introduction The Return of the Policy Ineffectiveness Proposition The Quest for a Fully Specified General Equilibrium Framework Formalist Technique and the Logic of Market Self-Regulation Conclusion 4. Looking Ahead: From Uneconomic Economics to a Different Future Introduction The Definition of Good Economics The Significance of Historicised Method Final Words References Index
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