LibrerÃa Samer Atenea
Kálamo Books
LibrerÃa ElÃas (Asturias)
LibrerÃa Kolima (Madrid)
LibrerÃa Proteo (Málaga)
Toxic economic theory originates from its ’schizophrenic’ division into separate macro- and macro- compartments. The microeconomic market-value fallacy - by ignoring the macroeconomic repercussions - fosters the delusion that an increase in market value necessarily represents a gain in real wealth. This fallacy is responsible for fraudulent ’fair value’ accounting standards and for an epidemic of ’balance-sheet myopia’. In creating an unsustainable pyramid of ever-increasing loans secured on ever-rising house-prices, it is the root cause of the current economic crisis.The macroeconomic single-gear fallacy - by disregarding the microeconomic foundations - encourages the misconception that the economy is a single-gear machine requiring no more than the lubrication of free competition for operation at its full employment potential. This fallacy is the product of a forty-year-old consensus manufactured to cover up a theoretical schism between squabbling Keynesian and monetarist sects. By inducing misplaced confidence in structural reform as the only long-term cure for unemployment, it continues to prevent a solution to the crisis.The legacy of toxic economic theory is the bankruptcy of economic policy. The accounting system (burdened by unhelpful and occasionally fraudulent standards) is hardly ’fit for purpose’; it is not reliable for assessing or comparing corporate performance and has become an almost overpowering incentive to ’short-termism’. The tax system has evolved (through a series of historical accidents) into a dysfunctional ’non-system’ that obstructs the goals of economic policy. Single-gear macroeconomic policy, having failed to deliver full employment without inflation, now offers little more than a choice of evils: either single-gear ’austerity’ - which jeopardises growth; or else single-gear ’growth’ - which risks fuelling inflation.A Multi-Gear Strategy for Economic Recovery is outlined in the companion volume.
