The Assumptions Economists Make

Jonathan Schlefer

• Publisher: Belknap Press
• Year: 2012
• Print ISBN: 9780674975408, 9780674052260
• eBook ISBN: 9780674068834
• Topic: Economics
• Subtopic: Comparative Economics
• Index: Economics

Economists make confident assertions in op-ed columns and on cable news—so why are their explanations often at odds with equally confident assertions from other economists? And why are all economic predictions so rarely borne out? Harnessing his frustration with these contradictions, Jonathan Schlefer set out to investigate how economists arrive at their opinions.

"A lucid, plain-spoken account of the major economic models, which [Schlefer] introduces in chronological order, creating a kind of intellectual history of macroeconomics. He explains what the models assume, what they actually demonstrate—and where they fall short."
—Binyamin Applebaum, New York Times blog

"Fascinating...[Schlefer's] book is a tough critique of economics, but a deeply informed and sympathetic one."
—Justin Fox, Harvard Business Review blog

"This book is an impressive and informative analysis of the economics literature—and it presents some useful insights about how a more eclectic, catholic approach might allow economics to progress more convincingly into the future."
—Michelle Baddeley, Times Higher Education

"The Assumptions Economists make [is] a knowledgeable...broadside against neoclassical economics...Schlefer's gripes concern model-building run amok...His criticisms of these models are original and sophisticated."
—Christopher Caldwell, Literary Review

Index

Abramovitz, Moses, on total-factor productivity, 177

Abstract capital, 115–116, 118, 170–172

Abstract labor, 116, 118, 170–171

Ackerman, Frank, 14, 15, 19–20

Acts of God, 153

Administered wages, 172

Agents, heterogeneous, 268, 269–271

Agents, representative, 17, 170, 210, 211, 212, 240, 267, 268

Aggregate capital, 116, 118, 170–171

Aggregate demand. See Market demand

Aggregate labor, 118, 170–172

Aggregate output/commodity, 118, 170–172

Aggregate production function: Clark on, 116–120, 170–171, 172, 211, 218–219, 264; dual of, 122; and income inequality, 122–123, 131

Allende, Salvador, 6, 222

Altruism, 78, 263, 266

American Economic Association, 2–3, 18, 100, 200

American Economic Review, 105

American International Group (AIG), 7, 161, 244

American Revolution, 33, 46; Declaration of Independence, 39, 71

Anarchists, 99–100

Animal spirits and investment decisions, 150, 151, 159, 169, 173, 223, 246, 253, 261

Argentine financial crisis of 2001, 7

Arrow, Kenneth, 172, 221; general-equilibrium model of, 9, 11–15, 17, 20–21, 89, 157, 170, 204, 242, 267, 279, 296n8

Arthur, W. Brian, 268–271

Artificial intelligence, 268

Asian Development Bank, 117, 193–194

Asian financial crisis of 1997, 7

Asian model, 183, 184, 215–216

Aspe, Pedro, 154

Asset price cycle, 241

Asset transformation, 242, 243, 244

Asymmetric information, 243

AT&T’s Bell Labs, 185

Auctioneer, 12–14, 21, 268, 285n37

Automobile industry, 107–108, 109, 113, 117, 134, 231

Bagehot problem, 244–245

Baily, Martin, 216

Baker, Dean, “Fact Sheet,” 241

Bankers Trust, 154

Bankruptcy, 5

Banks: commercial vs. investment, 7; investment by, 7, 242–244; cash hoarded by, 51–52, 150, 160, 161, 162, 277–278, 289n17, 301n17, 315n32; asset transformation by, 242, 243, 244; banking crises, 242–245; Taylor on, 284n16

Barbosa, ...

Table of contents

• Cover
• Title Page
• Copyright
• Dedication
• Contents
• A Personal Note
• ONE The Metaphor of the Invisible Hand
• TWO What Do Economists Do?
• THREE In Search of a Model
• FOUR Economics When Society Matters
• FIVE Chasing a Chimera
• SIX Utopia
• SEVEN This Imperfect World
• EIGHT Entering the Realm of Production
• NINE What Caused Income Inequality?
• TEN Understanding an Uncertain World
• ELEVEN In the Long Run
• TWELVE In the Short Run
• THIRTEEN The Puzzle of the Golden Age of Capitalism
• FOURTEEN Economies in Crisis
• FIFTEEN Thinking about Economies
• Notes
• References
• Index