,REVIEW3 ,DEBUNK+ ,ECONOMICS 
,! ,NAK$ ,EMP]OR ( ! ,SOCIAL ,SCI5CES 

,PEOPLE 3 

,AU?OR 3 ,IA9 ,MC,KAY 

,TEXT 3 

,DEBUNK+ ,ECONOMICS3 ,! ,NAK$ ,EMP]OR ( ! ,SOCIAL ,SCI5CES1 ,/EVE ,KE51 ,Z$ ,BOOKS 7,I,S,B,N3 #a#h#f#d#c#g#d7 

,TO P>APHRASE ,NIETZS*E1 ECONOMICS IS DEAD WE HAVE KILL$ IT ) \R DISBELIEF4 ,TO SEE :Y1 ,/EVE ,KE5'S EXCELL5T BOOK IS ESS5TIAL READ+ 7AS IS HIS WEBPAGE3 WWW4DEBUNK+ECONOMICS4COM74 ,IT IS AN IMPORTANT WORK & RECOMM5D$ = ANY ONE 9T]E/+ 9 F9D+ \T AB\T ! LIMITATIONS ( MA9/REAM ECONOMICS4 

,& :AT LIMITATIONS !Y >E6 ,KE5 GOES 9TO ! CRAZY ASSUMPTIONS1 ME?ODOLOGY & CONTRADICTIONS ( NEOCLASSICAL ECONOMICS 9 SOME DETAIL1 DEBUNK+ KEY ASPECTS ( ! DOGMA & %[+ NOT ONLY :5 !Y CONTRADICT REALITY BUT ALSO :5 !Y >E LOGICALLY 9CONSI/5T & CONTRADICT ITSELF4 ,KE5 >GUES ?AT IT IS IMPOSSIBLE TO IGNORE ECONOMICS 70TO TREAT IT & ITS PRACTITION]S AS WE !SE TREAT A/ROLOG]S07 AS IT IS A SOCIAL DISCIPL9E & SO :AT WE 0BELIEVE AB\T ECONOMICS !RE=E HAS AN IMPACT UPON HUMAN SOCIETY & ! WAY WE RELATE TO ONE ANO!R40 ,DESPITE 0! ABYSMAL PR$ICTIVE RECORD ( !IR DISCIPL9E10 ECONOMI/S 0>E =EV] RECOMM5D+ WAYS 9 :I* ! 9/ITUTIONAL 5VIRONM5T %\LD BE ALT]$ TO MAKE ! ECONOMY WORK BETT]10 I4E4 MAKE ! REAL ECONOMY MORE LIKE !IR MODELS 7AS 0! HYPO!TICAL PURE M>KET P]=MS BETT] ?AN ! MIX$ ECONOMY 9 :I* WE LIVE074 7PP4 #f-#h7 

,GIV5 ?AT S9CE ! MID-#a#i#gS ! PROMOTION ( ! M>KET & ! R$UCTION ( GOV]NM5T 9T]F]5CE 9 ! ECONOMY HAVE BECOME DOM9ANT4 ,! 0GLOBAL ECONOMY ( ! E>LY #b#a/ C5TURY LOOKS A LOT MORE LIKE ! ECONOMIC TEXTBOOK IDEAL ?AT DID ! WORLD ( ! #a#i#eS 444 ,ALL !SE *ANGES HAVE FOLL[$ ! ADVANCE ( ECONOMI/S ?AT ! UNFETT]$ M>KET IS ! BE/ WAY TO ALLOCATE RES\RCES1 & ?AT WELL-9T5TION$ 9T]V5TIONS :I* OPPOSE M>KET =CES WILL ACTUALLY DO MORE H>M ?AN GOOD40 ,AS SU*1 0.<W.>I? ! M>KET SO MU* MORE 9 CONTROL ( ! GLOBAL ECONOMY N[ ?AN FIFTY YE>S AGO1 !N IF ECONOMI/S >E RI<T1 ! WORLD %\LD BE A MANIFE/LY BETT] PLACE3 IT %\LD BE GR[+ FA/]1 ) MORE /ABILITY1 & 9COME %\LD GO TO ?OSE :O DES]VE IT40 ,H[EV]1 0.<U.>N=TUNATELY1 ! WORLD REFUSES TO DANCE ! EXPECT$ TUNE4 ,9 P>TICUL>LY1 ! F9AL T5 YE>S ( ! #b? C5TURY W]E M>K$1 NOT BY TRANQUIL GR[?1 BUT BY CRISES40 7P4 #b7 

,!SE PROBLEMS & ! G5]AL UNHAPP9ESS ) ! WAY SOCIETY IS GO+ IS RELAT$ TO V>I\S FACTORS1 MO/ ( :I* >E IMPOSSIBLE TO REFLECT 9 MA9/REAM ECONOMIC ANALYSIS EV5 IF ECONOMI/S C\LD BE BO!R$ TO 9CLUDE !M 7!IR ASSUMPTIONS & ME?ODOLOGY EXCLUDE SU* CONC]NS BY BEHALF74 ,!Y FL[ FROM ! FACT ?AT CAPITALISM IS A SY/EM M>K$ BY 9EQUALITIES ( WEAL? & P[] & SO H[ IT DEVELOPS IS BAS$ ON !M1 NOT ! SUBJECTIVE EVALUATIONS ( ATOMIZ$ 9DIVIDUALS ?AT ECONOMICS />TS )4 

,AN>*I/S >GUE ?AT ?IS IS UNSURPRIS+ AS ECONOMICS1 RA!R ?AN BE+ A SCI5CE IS1 9 FACT1 LITTLE MORE ?AN AN IDEOLOGY :OSE MA9 AIM IS TO JU/IFY & RATIONALIZE ! EXI/+ SY/EM4 ,KE5'S BOOK IS A CONTRIBUTION TO MAK+ ECONOMICS 0LESS ( A RELIGION & MORE ( A SCI5CE0 BY TE>+ UP 0! F\NDATIONS ( ECONOMICS0 &1 AS SU*1 IT %\LD BE ESS5TIAL READ+ = ALL4 7P4 #a#i7 ,GIV5 H[ COMPREH5SIVE HIS BOOK IS1 IT IS DIFFICULT TO COV] ALL ASPECTS ( IT4 ,AS SU*1 ,I WILL CONC5TRATE ON SOME KEY >EAS :I* WILL 9DICATE :Y AN>*I/S %\LD READ IT4 

,AS ,KE5 >GUES1 NEOCLASSICAL ECONOMICS IS BAS$ ON A 0DYNAMICALLY IRRELEVANT & FACTUALLY 9CORRECT 9/ANTANE\S /ATIC SNAP-%OT0 ( ! REAL CAPITALI/ ECONOMY4 7P4 #a#i#g7 ,EQUILIBRIUM ANALYSIS SIMPLY PRES5TS AN UNREAL PICTURE ( ! REAL WORLD4 ,NOT ?AT ! /ABLE UNIQUE EQUILIBRIUM ACTUALLY EXI/ =1 IRONICALLY1 0MA!MATICIANS HAVE %[N ?AT1 UND] FAIRLY G5]AL CONDITIONS1 G5]AL EQUILIBRIUM IS UN/ABLE40 7P4 #a#g#c7 ,ECONOMICS TREATS A DYNAMIC SY/EM AS A /ATIC ONE1 BUILD+ MODELS ROOT$ 9 ! CONCEPT ( EQUILIBRIUM :5 A NON-EQUILIBRIUM ANALYSIS MAKES OBVI\S S5SE4 ,IT IS NOT ONLY ! REAL WORLD ?AT HAS SUFF]$1 SO HAS ECONOMICS3 

0,?IS OBSESSION ) EQUILIBRIUM HAS IMPOS$ 5ORM\S CO/S ON ECONOMICS 444 UNREAL ASSUMPTIONS >E NE$$ TO MA9TA9 CONDITIONS UND] :I* !RE WILL BE A UNIQUE1 'OPTIMAL' EQUILIBRIUM 444 ,IF Y\ BELIEVE Y\ CAN USE UNREALITY TO MODEL REALITY1 !N EV5TUALLY Y\R GRIP ON REALITY ITSELF CAN BECOME T5U\S40 7P4 #a#g#g7 

,9DE$1 ! NEO-CLASSICAL !ORY FALLS FLAT ON ITS FACE4 ,BAS+ ITSELF1 9 EFFECT1 ON A SNAP%OT ( TIME ITS PR9CIPLES = ! RATIONAL FIRM >E1 LIKEWISE1 BAS$ ON TIME /&+ /ILL4 ,IT >GUES ?AT PR(IT IS MAXIMIZ$ :]E M>G9AL CO/ EQUALS M>G9AL REV5UE YET ?IS IS 0CORRECT IF ! QUANTITY PRODUC$ NEV] *ANGES0 & 0BY IGNOR+ TIME 9 ITS ANALYSIS ( ! FIRM1 ECONOMIC !ORY IGNORES SOME ( ! MO/ IMPORTANT ISSUES FAC+ A FIRM40 ,NEO-CLASSICAL ECONOMICS 0IGNORES TIME1 & IS !RE=E ONLY RELEVANT 9 A WORLD 9 :I* TIME DOES NO MATT]40 7PP4 #h-#a7 

,ECONOMICS EV5 HAS PROBLEMS ) ITS FAVOR$ TOOL1 MA!MATICS4 ,AS ,KE5 9DICATES1 ECONOMI/S HAVE 0OBSCUR$ REALITY US+ MA!MATICS BECAUSE !Y HAVE PRACTIC$ MA!MATICS BADLY1 & BECAUSE !Y HAVE NOT REALIZ$ ! LIMITS ( MA!MATICS40 ,9DE$1 !RE >E 0NUM]\S !OREMS 9 ECONOMICS ?AT REPLY UPON MA!MATICALLY FALLACI\S PROPOSITIONS40 7P4 #beh & P4 #b#e#i7 ,AS AN EXAMPLE1 HE PO9TS TO ! !ORY ( P]FECT COMPETITION :I* ASSUMES ?AT :ILE ! DEM& CURVE = ! M>KET AS A :OLE IS D[NW>D SLOP+1 AN 9DIVIDUAL FIRM 9 P]FECT COMPETITION IS SO SMALL ?AT IT CANNOT AFFECT ! M>KET PRICE &1 CONSEQU5TLY1 FACES A HORIZONTAL DEM& CURVE4 ,9 O!R WORDS1 ECONOMICS BREAKS ! LAWS ( MA!MATICS4 

,A KEY *APT] IS ,KE5'S DISCUSSION ( ! ,CAMBRIDGE ,CAPITAL ,CONTROV]SY :5 DISSID5T ECONOMI/S PO9T$ \T ?AT ! NEOCLASSICAL JU/IFICATION = PR(ITS AS ! CONTRIBUTION ( CAPITAL TO \TPUT WAS DEEPLY FLAW$4 ,:ILE LEAD+ NEOCLASSICAL ECONOMI/S ADMITT$ ?AT ! CRITIQUE WAS CORRECT 9 ! #a#i#fS1 TODAY 0ECONOMIC !ORY CONT9UES TO USE EXACTLY ! SAME CONCEPTS :I* ,SRAFFA'S CRITIQUE %[$ TO BE COMPLETELY 9VALID0 9 SPITE ! 0DEF9ITIVE CAPITULATION BY AS SIGNIFICANT AN ECONOMI/ AS ,PAUL ,SAMUELSON40 ,AS HE CONCLUDES3 0,!RE IS NO BETT] SIGN ( ! 9TELLECTUAL BANKRUPTCY ( ECONOMICS ?AN ?IS40 7P4 #a#d#f1 P4 #a#b#i1 P4 #a#d#g7 ,?IS IS IMPORTANT AS ?IS !ORY 7!ORY ( M>G9AL PRODUCTIVITY7 IS US$ TO ?IS DAY TO JU/IFY ! CURR5T DI/RIBUTION ( 9COME1 >GU+ ?AT ! WID5+ GAP BETWE5 RI* & POOR SIMPLY REFLECTS ! M>KET EFFICI5TLY REW>D+ PRODUCTIV5ESS4 

,:AT IS ! CRITIQUE ( ?IS MA9/AY ( ECONOMIC OR?ODOXY8 ,9 ESS5CE1 CAPITAL GOODS CANNOT BE AGGREGAT$ TOGE!R UNLESS Y\ GIVE !M A PRICE4 ,H[EV]1 TO GIVE !M A PRICE 9VOLVES ASSUM+ A RATE ( 9T]E/ EQUAL TO ! RATE ( PR(IT4 ,?IS MEANS ?AT ! RATE ( PR(IT ON CAPITAL IS MEAN+LESS AS IT IS BAS$ ON CIRCUL> REASON+ & SO PR(ITS CANNOT EQUAL ANY CONTRIBUTION TO PRODUCTION4 

,EV5 IF Y\ IGNORE ?IS PROBLEM1 M>G9AL PRODUCTIVITY !ORY /ILL RUNS AGR\ND4 ,KE5 SUMM>IZES ! >GUM5TS1 NOT+ ?AT LOOK+ AT ! ECONOMY AS A :OLE1 0! DESIR$ RELATION%IP -- ! RATE ( PR(IT EQUALS ! M>G9AL PRODUCTIVITY ( CAPITAL -- WILL NOT HOLD TRUE0 AS IT ONLY APPLIES 0:5 ! CAPITAL TO LABOR RATIO IS ! SAME 9 ALL 9DU/RIES -- :I* IS EFFECTIVELY ! SAME AS SAY+ !RE IS ONLY ONE 9DU/RY40 ,?US 0:5 A BROADLY DEF9$ 9DU/RY IS CONSID]$1 *ANGES 9 ITS CONDITIONS ( SUPPLY & DEM& WILL AFFECT ! DI/RIBUTION ( 9COME40 ,?IS MEANS ?AT A 0*ANGE 9 ! CAPITAL 9PUT WILL *ANGE \TPUT1 BUT IT ALSO *ANGES ! WAGE1 & ! RATE ( PR(IT 444 ,! DI/RIBUTION ( 9COME IS TO SOME SIGNIFICANT DEGREE DET]M9$ 9DEP5D5TLY ( M>G9AL PRODUCTIVITY 444 TO WORK \T PRICES1 IT IS FIR/ NECESS>Y TO KN[ ! DI/RIBUTION ( 9COME 444 ,!RE IS !RE=E NO?+ SACROSANCT AB\T ! PRICES ?AT APPLY 9 ! ECONOMY1 & EQUALLY NO?+ SACROSANCT AB\T ! DI/RIBUTION ( 9COME4 ,IT REFLECTS ! RELATIVE P[] ( DIFF]5T GR\PS 9 SOCIETY40 7P4 #a#c#e7 

,KE5 %[S ! UNSCI5TIFIC NATURE ( ECONOMICS BY LOOK+ AT ! NOTION ( DIM9I%+ M>G9AL CO/S REQUIR$ TO PRODUCE A D[NW>D SLOPP+ SUPPLY CURVE4 ,HE PRES5TS A SUMM>Y ( ! EMPIRICAL EVID5CE :I* CONTRADICTS ?IS KEY ASSUMPTION ( ECONOMICS4 ,H[ HAS ECONOMICS H&L$ ?IS CONSI/5T EVID5CE ACCUMULAT$ OV] MANY DECADES8 ,BY IGNOR+ IT4 ,?IS SPEAKS VOLUMES = ! WAY ?AT ECONOMICS H&LES CONTR>Y EVID5CE TO ACCEPT$ BELIEFS4 ,NOT ?AT ?IS %\LD COME AS A SURPRISE1 GIV5 ?AT ! NOTION WAS ORIG9ALLY 9V5T$ TO 5SURE ?AT NEOCLASSICAL ECONOMICS DID NOT SUGGE/ ?AT ! ECONOMY W\LD BECOME DOM9AT$ BY BIG BUS9ESS 7?AT ?IS WAS PRECISELY :AT WAS HAPP5+ 9 ! REAL ECONOMY AT ! TIME WAS CONSID]$ IRRELEVANT74 ,IT %\LD BE NOT$ ?AT ! EMPIRICAL RESE>* SIMPLY CONFIRM$ AN E>LI] CRITIQUE ( NEO-CLASSICAL ECONOMICS PRES5T$ BY ,PI]O ,SRAFFA 9 #a#i#b#f1 A CRITIQUE ,KE5 ABLY SUMM>IZES4 7PP4 #f#f-#g#b7 

,NO O!R SCI5CE W\LD ?9K IT APPROPRIATE TO DEVELOP !ORY UTT]LY 9DEP5D5TLY ( PH5OM5ON UND] ANALYSIS4 ,NO O!R SCI5CE W\LD WAIT DECADES BE=E TE/+ A !ORY AGA9/ REALITY4 ,NO O!R SCI5CE W\LD !N SIMPLY IGNORE ! FACTS :I* UTT]LY CONTRADICT$ ! !ORY & CONT9UE TO TEA* ?AT !ORY AS IF IT W]E A VALID G5]ALIZATION ( ! FACTS4 ,?IS /RANGE P]SPECTIVE MAKES S5SE ONCE IT IS REALIZ$ H[ KEY ! NOTION ( DIM9I%+ CO/S IS TO ECONOMICS4 ,9 FACT1 IF ! ASSUMPTION ( 9CREAS+ M>G9AL CO/S IS AB&ON$ !N SO MU* ( NEOCLASSICAL ECONOMICS4 ,IT IS WOR?:ILE QUOT+ ,KE5 AT L5G? ON ?IS3 

0,/RANGE AS IT MAY SEEM 444 ?IS IS A V]Y BIG DEAL4 ,IF M>G9AL RETURNS >E CON/ANT RA!R ?AN FALL+1 !N ! NEO-CLASSICAL EXPLANATION ( EV]Y?+ COLLAPSES4 ,NOT ONLY CAN ECONOMIC !ORY NO LONG] EXPLA9 H[ MU* A FIRM PRODUCES1 IT CAN EXPLA9 NO?+ ELSE4 

0,TAKE1 = EXAMPLE1 ! ECONOMIC !ORY ( EMPLOYM5T & WAGE DET]M9ATION 444 ,! !ORY ASS]TS ?AT ! REAL WAGE IS EQUIVAL5T TO ! M>G9AL PRODUCT ( LABOR 444 ,AN EMPLOY] WILL EMPLOY AN ADDITIONAL WORK] IF ! AM\NT ! WORK] ADDS TO \TPUT -- ! WORK]'S M>G9AL PRODUCT -- EXCE$S ! REAL WAGE 444 .<,?IS.> EXPLA9S ! ECONOMIC PR$ILECTION = BLAM+ EV]Y?+ ON WAGES BE+ TOO HI< -- NEO-CLASSICAL ECONOMICS CAN BE SUMM$ UP1 AS .<,JOHN ,K5NE?.> ,GALBRAI? ONCE REM>K$1 9 ! TW9 PROPOSITIONS ?AT ! POOR DON'T WORK H>D 5\< BECAUSE !Y'RE PAID TOO MU*1 & ! RI* DON'T WORK H>D 5\< BECAUSE !Y'RE NOT PAID 5\< 444 

0,IF 9 FACT ! \TPUT TO EMPLOYM5T RELATION%IP IS RELATIVELY CON/ANT1 !N ! NEO-CLASSICAL EXPLANATION = EMPLOYM5T & \TPUT DET]M9ATION COLLAPSES4 ,) A FLAT PRODUCTION FUNCTION1 ! M>G9AL PRODUCT ( LABOR WILL BE CON/ANT1 & IT WILL NEV] 9T]SECT ! REAL WAGE4 ,! \TPUT ( ! =M !N CAN'T BE EXPLA9$ BY ! CO/ ( EMPLOY+ LABOR444 .<,?IS MEANS ?AT.> NEO-CLASSICAL ECONOMICS SIMPLY CANNOT EXPLA9 ANY?+3 NEI!R ! LEVEL ( EMPLOYM5T1 NOR \TPUT1 NOR1 ULTIMATELY1 :AT DET]M9ES ! REAL WAGE 444! 5TIRE $IFICE ( ECONOMICS COLLAPSES40 7PP4 #g#f-#g7 

,DEM& IS JU/ AS BAD1 ) NEOCLASSICAL ECONOMICS ITSELF PROV+ ?AT Y\ CANNOT AGGREGATE 9DIVIDUAL DEM& CURVES UNLESS Y\ APPLY SOME V]Y SURREAL ASSUMPTIONS4 ,?IS WAS =C$ UPON IT AS ! ORIG9AL V]SIONS ( UTILITY !ORY W]E US$ TO JU/IFY ! R$I/RIBUTION ( WEAL?4 ,TO AVOID ?AT CONCLUSION ECONOMI/S HAD TO %[ ?AT 0ALT]+ ! DI/RIBUTION ( 9COME DID NOT ALT] SOCIAL WELF>E4 ,!Y WORK$ \T ?AT TWO CONDITIONS W]E NECESS>Y = ?IS TO BE TRUE3 7A7 ?AT ALL PEOPLE HAVE ! SAME TA/ES2 7B7 ?AT EA* P]SON'S TA/ES REMA9 ! SAME AS H] 9COME *ANGES1 SO ?AT EV]Y ADDITIONAL DOLL> ( 9COME WAS SP5T EXACTLY ! SAME WAY AS ALL PREVI\S DOLL>S40 ,! =M] ASSUMPTION 09 FACT AM\NTS TO ASSUM+ ?AT !RE IS ONLY ONE P]SON 9 SOCIETY40 ,! LATT] ASSUMPTION 0AM\NTS TO ASSUM+ ?AT !RE IS ONLY ONE COMMODITY -- S9CE O!RWISE SP5D+ PATT]NS W\LD NECESS>Y *ANGE AS 9COME ROSE40 ,! NET EFFECT IS ?AT ONE ESS5TIAL BUILD+ BLOCK ( ! ECONOMIC ANALYSIS ( M>KETS1 ! DEM& CURVE1 0DOES NOT HAVE ! *>ACT]I/ICS NE$$ = ECONOMIC !ORY TO BE 9T]NALLY CONSI/5T40 7P4 #bd & PP4 #b#e-#g7 

,?IS IS IMPORTANT BECAUSE 0ECONOMI/S >E TRY+ TO PROVE ?AT A M>KET ECONOMY NECESS>ILY MAXIMIZES SOCIAL WELF>E4 ,IF !Y CAN'T PROVE ?AT ! M>KET DEM& CURVE FALLS SMOO?LY AS PRICE RISES1 !Y CAN'T PROVE ?AT ! M>KET MAXIMIZES SOCIAL WELF>E40 ,9 ADDITION1 0! CONCEPT ( A SOCIAL 9DIFF]5CE CURVE IS CRUCIAL TO MANY ( ! KEY NOTIONS ( ECONOMICS3 ! >GUM5T ?AT FREE TRADE IS NECESS>ILY SUP]IOR TO REGULAT$ TRADE1 = EXAMPLE1 IS FIR/ CON/RUCT$ US+ A SOCIAL 9DIFF]5CE CURVE4 ,!RE=E1 IF ! CONCEPT ( A SOCIAL 9DIFF]5CE CURVE ITSELF IS 9VALID1 !N SO TOO >E MANY ( ! MO/ TREASUR$ NOTIONS ( ECONOMICS40 7P4 #e7 

,KE5 ALSO DEBUNKS ,SAY'S LAW & ! NOTION D]IV$ FROM IT ?AT 9VOLUNT>Y UNEMPLOYM5T & RECESSIONS >E IMPOSSIBLE UND] FREE M>KET CAPITALISM4 ,SAY'S LAW 0EVISAGE.<S.> AN EX*ANGE-ONLY ECONOMY3 AN ECONOMY 9 :I* GOODS EXI/ AT ! \TSET1 BUT :]E NO PRODUCTION TAKES PLACE4 ,! M>KET SIMPLY 5ABLES ! EX*ANGE ( PREEXI/+ GOODS40 ,?IS IS 0BE/ SUIT$ TO ! ECONOMIC IRRELEVANCE ( AN EX*ANGE-ONLY ECONOMY1 OR A PRODUCTION ECONOMY 9 :I* GR[? DOES NOT OCCUR4 7P4 #a#i#d-#g7 ,EQUALLY IMPORTANT IS HIS CRITIQUE ( ! /&>D MODEL ( ! LABOR M>KET :I* %[S ?AT 0WAGES >E HI<LY UNLIKELY TO REFLECT WORK]S' CONTRIBUTIONS TO PRODUCTION0 7HE NOTES ?AT ECONOMIC !ORY ITSELF %[S ?AT WORK]S WILL NOT GET A FAIR WAGE :5 !Y FACE ORGANIZ$ OR V]Y P[]FUL EMPLOY]S UNLESS !Y ORGANIZE UNIONS74 ,?IS IS BECAUSE ECONOMI/S TREAT LABOR AS NO DIFF]5T FROM O!R COMMODITIES YET 0ECONOMIC !ORY SUPPORTS NO SU* CONCLUSION40 ,AT ITS MO/ BASIC1 LABOR IS NOT PRODUC$ = PR(IT & ! 0SUPPLY CURVE = LABOR CAN 'SLOPE BACKW>D' -- SO ?AT A FALL 9 WAGES CAN CAUSE AN 9CREASE 9 ! SUPPLY ( WORK]S40 7PP4 #a#a#a-#b & PP4 #a#a#h-#i7 

,HE /RESSES ?AT ! IDEA ( A BACKW>D SLOP+ SUPPLY CURVE = LABOR IS JU/ AS EASY TO D]IVE FROM ! ASSUMPTIONS US$ BY ECONOMI/S TO D]IVE !IR /&>D ONE4 ,?US ECONOMIC !ORY 0FAILS TO PROVE ?AT EMPLOYM5T IS DET]M9$ BY SUPPLY & DEM&1 & RE9=CES ! REAL WORLD OBS]VATION ?AT 9VOLUNT>Y UNEMPLOYM5T CAN EXI/0 AS R$UC+ ! WAGE NE$ NOT BR+ ! DEM& & SUPPLY ( LABOR 9TO ALIGNM5T4 ,:ILE ! ASSUMPTION ( AN UPW>D SLOP+ SUPPLY CURVE IS TAK5 AS ! NORMAL SITUATION1 0!RE IS NO !ORETICAL -- OR EMPIRICAL -- JU/IFICATION = ?IS40 ,SADLY = ! WORLD1 ?IS ASSUMPTION IS US$ TO DRAW V]Y /RONG CONCLUSIONS BY ECONOMI/S 7>GUM5TS AGA9/ M9IMUM WAGES1 TRADE UNIONS & DEM& MANAGEM5T BY GOV]NM5T >E ALL BAS$ ON IT74 ,YET SU* IMPORTANT POLICY POSITIONS 0%\LD BE BAS$ UPON ROBU/ 9TELLECTUAL OR EMPIRICAL F\NDATIONS1 RA!R ?AN ! FLIMSY SUB/RATE ( M]E FANCY4 ,ECONOMI/S >E QUITE PRONE TO DISMISS ALT]NATIVE P]SPECTIVES ON LABOR M>KET POLICY ON ?IS V]Y BASIS -- ?AT !Y LACK ANY !ORETICAL OR EMPIRICAL F\NDATIONS4 ,YET !IR [N POLICY POSITIONS >E BAS$ AS MU* ON WI%FUL ?9K+ AS ON WISDOM40 7PP4 #a#b#a-#b & P4 #a#b#c7 

,KE5 ALSO DEBUNKS ! REALLY RIDICUL\S NEOCLASSICAL !ORIES ( ! /OCK M>KET1 NOT+ ?AT ! MOD]N !ORY IS ROOT$ 9 ! IDEAS ( A #a#i#bS ECONOMI/ :O HAD ! DEC5CY TO REVISE HIS !ORY :5 FAC$ ) ! #aibi CRA%4 ,HIS DISSECTION ( ! ,EFFICI5T ,M>KET ,HYPO!SIS IS A CLASSIC1 %[+ H[ IT ASSUMES ?AT EV]YONE IS ID5TICAL 9 T]MS ( :AT !Y KN[1 :AT !Y CAN GET & :AT !Y DO ) KN[L$GE & CA%4 ,?IS RESULTS 9 A !ORY :I* >GUES ?AT 9VE/ORS CORRECTLY PR$ICT ! FUTURE4 ,HE QUOTES ! DEVELOP] ( ! !ORY BE+ HONE/ 5\< TO /ATE ?AT ! 0CONSEQU5CE ( ACCOMMODAT+0 KEY ASPECTS ( REALITY 0>E LIKELY TO BE DISA/R\S 9 T]MS ( ! USEFULNESS ( ! RESULT+ !ORY 444 ,! !ORY IS 9 A %AMBLES40 ,UNSURPRIS+LY1 0AS TIME W5T ON1 MORE & MORE DATA TURN$ UP :I* WAS NOT CONSI/5T )0 ! !ORY4 ,?IS IS BECAUSE ! MODEL'S WORLD 0IS CLE>LY NOT \R WORLD40 ,IT 0%\LD NEV] HAVE BE5 GIV5 ANY CR$IBILITY -- YET 9/EAD IT BECAME AN >TICLE ( FAI? = ACADEMICS 9 F9ANCE1 & A COMMON BELIEF 9 ! COMM]CIAL WORLD ( F9ANCE40 7P4 #b#c#c1 P4 #bdf & P4 #b#c#d7 

,?IS 9SANE !ORY IS AT ! ROOT ( ! >GUM5T ?AT F9ANCE M>KETS %\LD BE D]EGULAT$ & AS MANY FUNDS AS POSSIBLE 9VE/$ 9 !M4 ,:ILE ! !ORY MAY B5EFIT ! M9ORITY ( %>E HOLD]S :O [N ! BULK ( %>ES & HELP !M PRESSURIZE GOV]NM5T POLICY1 IT IS H>D TO SEE H[ IT B5EFITS ! RE/ ( SOCIETY4 ,KE5 PRES5TS ALT]NATIVE1 MORE REALI/IC !ORIES :I* >GUE ?AT F9ANCE M>KETS %[ 5DOG5\S 9/ABILITY1 RESULT 9 BAD 9VE/M5T AS WELL AS R$UC+ ! OV]ALL LEVEL ( 9VE/M5T AS 9VE/ORS WILL NOT FUND 9VE/M5TS :I* >E NOT PR$ICT$ TO HAVE A SUFFICI5TLY HI< RATE ( RETURN4 ,ALL ( :I* HAS A L>GE & NEGATIVE IMPACT ON ! REAL ECONOMY4 

,SO1 ALL 9 ALL1 AN IMPORTANT BOOK :I* %\LD BE CONSID]$ ESS5TIAL READ+ BY ALL RADICALS -- O!RWISE Y\ WILL BE AT A DISADVANTAGE :5 DEBAT+ ?OSE :O TAKE ECONOMICS S]I\SLY4 

,FROM 3 ,!,AN>*I/,LIBR>Y4ORG4 

,*RONOLOGY 3 
,FEBRU>Y #a#a1 #bba 3 ,REVIEW3 ,DEBUNK+ ,ECONOMICS -- ,ADD$4 
,JANU>Y #g1 #bbb 3 ,REVIEW3 ,DEBUNK+ ,ECONOMICS -- ,UPDAT$4 

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