SIR – When I was a student we studied business cycles, but the topic disappeared with the rise of mathematical equilibrium theorising. The idea that capitalism is an equilibrium system is common among Keynesian and neoclassical economists; they only differ as to whether the equilibrium is at full employment or under employment. The grand synthesis being taught makes the equilibrium stochastic and dynamic, but that is all.In other words, boom and bust IS the equilibrium economic state, even in the absence of external shocks, and all Gordon Brown's self-delusion will never change that. What a damned useless fool that man is.
Capitalism is, however, a disequilibrium dynamic stochastic system as Marx, Wicksell, Schumpeter and Hayek have told us over the past two centuries. Richard Goodwin tried his best to present a mathematical theory of such a disequilibrium system. After this crisis we need to revive that tradition if we are not to be surprised by another crisis.
Thursday, 13 August 2009
Desai: No such thing as an end to boom and bust
Lord Desai has ridiculed his leader's pretentious claims to have ended boom and bust in the absence of external economic shocks. In a letter to the Economist Desai writes: