How to do post-crash economics?


Mainstream economics has not come up with any fresh ideas, or new methods of investigation after the gigantic crisis of 2008-9. Nothing has fundamentally changed, and suggestions that something is not quite right with the discipline are usually met with bafflement. The real issue, however, is not to point out the weaknesses, or the intellectual rigidity of mainstream economics, a task that has been repeatedly performed in recent decades. It is, rather, to produce analysis that is genuinely different from the mainstream, while remaining true to economics as a discipline.

In this light, the kind of economics that I find persuasive would have the following features:

First, it would be an economics of systems, underlying tendencies and aggregate behaviour, rather than focusing on minor problems of daily life, or simply devising different government policies.

Second, it would rest on uncompromising logic, though not on the dessicated rationality of the economising individual. The agents whose behaviour it would analyse would be chosen on a bigger canvas based on the key criterion of social class. These agents would operate in an environment of institutions, politics and custom and, not least, within the purview of the state.

Third, it would openly think of itself as a social science, happily borrowing from sociology, anthropology, geography and other disciplines.

Fourth, it would appreciate the complex interaction between theory and empirical work, revelling in the richness of empirical material, but without worshipping technique.

Fifth, it would be fully aware of the history of economic thought, realising that it saw far because it stood on the shoulders of giants.

Sixth, finally, it would not seek to show that equilibrium existed in the best of all possible worlds. On the contrary, it would focus on disequilibrium and the regular outburst of crises.

These were, for me, decisive principles in writing Profiting without Producing that deals with the financialisation of contemporary capitalism. Financialisation is a powerful new idea that has gradually made headway in several social sciences, though not in mainstream economics. It stands for a historic transformation of capitalism, an epoch-making development that includes new forms of profit, new sources of income and new corresponding social classes. It is a world of problematic production, weak productivity growth, enormous income differentials, vast expansion of the sphere of circulation, monopoly state control over the final means of payment, market-conforming regulation of finance, and absence of a reliable form of money in the world market. It is, consequently, a world of gigantic bubbles and crashes. I believe that these are the phenomena that economics ought to be analysing in a systemic and integral fashion, relying on social rather than individual categories. The sooner that more work is undertaken along these principles, the better for all.

Read Verso's post-crash economics reading list

Neoliberal economics isn't working and students are demanding more from their course reading than the 8th edition of Macroeconomics can provide. Following the news that Economics students in Manchester have formed the Post-Crash Economics Society and Aditya Chakrabortty's excoriating and controversial commentary on the state of contemporary economics, published in the Guardian this week, we present a reading list of economics titles which challenge the mainstream neoliberal consensus and offer powerful alternative models in contemporary economics.