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How Markets Work: Supply, Demand and the Real World
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It is true that the neoclassical oversimplification is ideologic, sometimes ressembling more religion than science. Unfortunately, the author does not succeed in presenting an alternative that is useful for further research. Like many heterodox economist, he gives lots of criticism, but no viable alternative. This is a good book for those eager to learn the flaws of neoclassical economics.
Positive economics is what most people think of as neoclassical economics. It’s the social science that studies economic activity to gain an understanding of the processes that govern the production, distribution and consumption of goods and services in an economy. It’s the attempt to understand and explain economic phenomena.
Normative economics, in contrast, isn’t about understanding anything. Its focus is on economic fairness and what the goals of economic policy ought to be. Viewed that way, our author Mr. Prasch is an economist in about the same way that Al Sharpton is a sociologist. Both may have studied their subject and accumulated masses of data, but an agenda-driven analysis of a subject is designed to persuade the reader of the benefits of a certain course of action, not to provide real understanding. This lack of intellectual independence makes a balanced presentation impossible, especially if the end goal is to understand. Positive economists may want to understand, but normative economists want to control.
As an example of the normative thrust of this book, 8 of the 13 pages of “Lecture IV” on asset markets (stocks and other financial assets) address instabilities in the foreign-exchange (FX) marketplace. The entire presentation culminates in a proposal for a special sales tax on such transactions to reduce speculation and make the market more orderly.Read more ›