Uneconomic Economics and the Crisis of the Model World PDF
Preview Uneconomic Economics and the Crisis of the Model World
Uneconomic Economics and the Crisis of the Model World DOI: 10.1057/9781137385499.0001 Building a Sustainable Political Economy: SPERI Research & Policy Series Editors: Colin Hay and Anthony Payne, co-Directors of the Sheffield Political Economy Research Institute (SPERI) at the University of Sheffield, UK. The Sheffield Political Economy Research Institute (SPERI) is an innovation in higher education research and outreach. It brings together leading international researchers in the social sciences, policy-makers, journalists and opinion formers to reassess and develop proposals in response to the political and economic issues posed by the current combination of financial crisis, shifting economic power and environmental threat. Building a Sustainable Political Economy: SPERI Research & Policy will serve as a key outlet for SPERI’s published work. Each title will summarise and disseminate to an academic and postgraduate student audience, as well as directly to policy- makers and journalists, key policy-oriented research findings designed to further the development of a more sustainable future for the national, regional and world economy following the global financial crisis. It takes a holistic and interdisciplinary view of political economy in which the local, national, regional and global interact at all times and in complex ways. The SPERI research agenda, and hence the focus of the series, seeks to explore the core economic and political questions that require us to develop a new sustainable model of political economy. Titles include: Matthew Watson UNECONOMIC ECONOMICS AND THE CRISIS OF THE MODEL WORLD Colin Hay THE FAILURE OF ANGLO-LIBERAL CAPITALISM Building a Sustainable Political Economy: SPERI Research & Policy Series Standing Order ISBN –––– hardback (outside North America only) You can receive future titles in this series as they are published by placing a standing order. Please contact your bookseller or, in case of difficulty, write to us at the address below with your name and address, the title of the series and the ISBN quoted above. Customer Services Department, Macmillan Distribution Ltd, Houndmills, Basingstoke, Hampshire RG XS, England DOI: 10.1057/9781137385499.0001 Uneconomic Economics and the Crisis of the Model World Matthew Watson Professor of Political Economy, University of Warwick, UK ESRC Professorial Fellow, 2013–2016 DOI: 10.1057/9781137385499.0001 © Matthew Watson 2014 Softcover reprint of the hardcover 1st edition 2014 978-1-137-38548-2 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6–10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2014 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN: 978–1–137–38549–9 PDF ISBN: 978-1-349-48126-2 A catalogue record for this book is available from the British Library. A catalog record for this book is available from the Library of Congress. www.palgrave.com/pivot doi: 10.1057/9781137385499 To my new nephew, Nathan. Welcome to the family. DOI: 10.1057/9781137385499.0001 Contents Acknowledgements viii List of Abbreviations x 1 Setting the Scene: From a Crisis of Economics to a Crisis of the State 1 Introduction 2 Competing crisis narratives of symptom and disease 3 The rehabilitation of economic theory 8 The crisis and the economics curriculum 12 Structure of the book 17 2 The Collapse of the Model World: From Faith in Equations to Unsustainable Asset Bubbles 20 Introduction 21 The growth of increasingly complex secondary mortgage markets 25 The uneconomic economics of asset-price valuation techniques 30 Performativity and counter-performativity in financial markets 36 Conclusion 41 3 The Creation of the Model World: From Formalist Techniques to the Triumph of Uneconomic Economics 45 Introduction 46 The return of the policy ineffectiveness proposition 49 vi DOI: 10.1057/9781137385499.0001 Contents vii The quest for a fully specified general equilibrium framework 55 Formalist technique and the logic of market self-regulation 59 Conclusion 65 4 Looking Ahead: From Uneconomic Economics to a Different Future 68 Introduction 69 The definition of good economics 70 The significance of historicised method 75 Final words 80 References 84 Index 102 DOI: 10.1057/9781137385499.0001 Acknowledgements This book had its genesis through a very fortunate coinci- dence of events. In the same week that I was asked to review the application for the SPERI Palgrave Pivot Series, Building a Sustainable Political Economy, I was in London attending an interview for an ESRC Professorial Fellowship. The con- versation turned at the instigation of the interviewers to whether it might be possible to use the underlying insights from my proposed ‘Rethinking the Market’ project to join the now voluminous debate about the implications of the global financial crisis. This struck me as being a very good idea whether or not I was awarded the Fellowship, and I determined at once to look into the possibility of writing a book from this perspective for the SPERI Palgrave Pivot Series. The result of the subsequent endeavours is what appears in the pages ahead. Luckily for me, the story has a double happy ending in that I was awarded the Fellowship to pursue my project: www.warwick.ac.uk/rethinkingthemarket. I would like to thank the Economic and Social Research Council for its continuing support of my research, as well as for all the opportunities for continued publishing that have opened up from the award of a three-year Professorial Fellowship. This, then, will be the first of a number of books on related themes to appear over the next few years. In itself, it represents where my thinking has currently evolved to since I first began to explore the relationship between economists’ purely abstract use of a device they call the ‘market’ and the actual markets that can be encountered in everyday life. I suspect that in continued viii DOI: 10.1057/9781137385499.0002 Acknowledgements ix conversations about this issue I will find plentiful reasons to allow my thinking to move on even further in the future. I certainly know how much it has benefited from similar conversations in the past. These have been too numerous for me to identify people by name without running the risk of a series of very important omissions from the ensuing list. For that reason I hope that colleagues past and present from Warwick and beyond, peers and friends within the profession and, perhaps above all, successive cohorts of my PhD students will forgive me if I consequently offer a generic ‘thank you’ for all that everyone has done to shape the research which appears here. It is by no means a less heartfelt gesture of appreciation for appearing in this form. DOI: 10.1057/9781137385499.0002
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