Saturday, October 2, 2010

Quiggin on "Zombie Economics": A Brief Review

John Quiggin, Zombie Economics: How Dead Ideas Still Walk Among Us (Princeton University Press 2010).

I pre-ordered John Quiggin's book, and started reading it the day it arrived. I finished it two days later. I'm no speed reader, but the book was a particularly fast read because (1) it is mercifully concise, (2) it is devoid of mind-numbing formal models, and (3) it is very well written and argued. In some respects, the book's aspirations were more modest than I had hoped; Quiggin focuses his attention on macroeconomic "zombies" - bad ideas that will not stay dead, but keep arising every so often to plague society. Are there no zombies in microeconomic theory? (Perhaps that's his next book.)

Because I am not a trained economist, let alone macroeconomist, I am not in a position to assess the extent to which Quiggin's arguments are airtight. However, I have a pretty good grasp of economic concepts and history, and his arguments certainly seemed compelling to me. At the very least, economists (and others) who support theories like efficient markets, rational expectations, and trickle-down, have a huge burden to bear to rebut Quiggin.

One chapter - on privatization - did strike me as marginally weaker than the others. Quiggin makes a strong case that privatization was overdone in the 1980s, but I'm not sure the concept is a "zombie" in the same way as, say, rational expectations. Privatization remains, at least sometimes, a viable solution to inefficient government provision of goods and services based on comparative transaction-cost analysis. In other words, there is still (and probably always will be) room for debate over the extent of government provision. By contrast, it is difficult to see how Fama's theories of efficient markets or Lucas's theories of rational expectations have any legitimate role to play in fashioning a more realistic macroeconomics.

The bottom line is this: if you read only one book about the history and implementation of macroeconomic policies in the 20th and early-21st centuries, this should be it. Despite the scary title and somewhat silly cover graphics, this is a very serious book with very serious messages for professional economists and policy-makers.

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