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Zombie Economics

How Dead Ideas Still Walk Among Us

John Quiggin

Princeton UP, 2010

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Like a horror movie villain, discredited economic theories can return to haunt you. Australian economist John Quiggin claims that some of these ideas – like total privatization, perfectly rational markets and trickle-down policies – nearly destroyed the world’s economy and are attempting a comeback. To drive the final stake through the brain-eating, dead soul of “zombie economics,” he knifes through five dangerous principles of “market liberalism.” With no apparent fear of controversy, he explains why each “zombie idea” failed and describes a new, alternative approach, melding free-market capitalism with judicious use of government involvement to address crucial social needs. Quiggin heavily annotates his work, and though economic jargon can, at times, slow your progress, he rewards your persistence. This eerie tour through defunct yet durable economic theories will intrigue anyone who enjoys a good scare. Find your silver bullets, construct your booby traps and carry your axes for good measure: Quiggin says the time has come to kill those zombies once and for all.

Summary

Economic theories continue to live as “zombie ideas” even after events refute them.

Even when events ultimately disprove them, popular economic theories can take on a life of their own. Their influence, honed over decades, is hard to shake, and their impact lingers long after reality refutes them.

”The 2008 “Global Financial Crisis” laid bare the failures of five long-held principles that guided policymakers, economists, investors, bankers and just about everyone with financial interests, from the early 1980s until the bust.

The 2008 “Global Financial Crisis” exposed the fallacy of five hard-to-kill principles that fueled “market liberalism”:

These ideas underpinned an economic philosophy that had a variety of names – “Thatcherism” in the UK, “Reaganism” in the US, “the Washington Consensus,” “neoliberalism” and “market liberalism” – but relied on the same five zombie ideas:

1. Beginning in the 1990s, “the Great Moderation” claimed business cycles had stilled, ending boom and bust.

This idea proclaimed the death of the traditional business cycle. Throughout history, pundits have greeted recurring financial ups and downs with the declaration...

About the Author

John Quiggin is an economics professor at the University of Queensland in Australia.

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A. 1 decade ago

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