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Time for a Copernican revolution in economics By Steve Keen | August 27, 2014 | Debtwatch The global financial crisis took the vast majority of the economics profession by surprise. Though there were individual mainstream economists -- such as Robert Shiller and Joseph Stiglitz -- who claim to have warned of the crisis, no mainstream economic model foresaw anything like what eventuated in 2007. In fact, mainstream model predictions led to politicians being advised to expect tranquil economic conditions ahead. The OECD’s advice in its June 2007 Economic Outlook was typical: "Indeed, the current economic situation is in many ways better than what we have experienced in years. Against that background, we have stuck to the rebalancing scenario.Our central forecast remains indeed quite benign: a soft landing in the United States, a strong and sustained recovery in Europe, a solid trajectory in Japan and buoyant activity in China and India. In line with recent trends, sustained growth in OECD economies would be underpinned by strong job creation and falling unemployment.” (“OECD forecasts gentle turn for global economy”) After being so disastrously wrong, one might expect that this modeling approach would now be subject to serious revision. But while New Keynesian DSGE model-builders are starting to add “financial frictions” to their repertoire of factors that prevent the economy from almost instantly attaining a competitive equilibrium (as in New Classical models), the core paradigm — of an economy which, left to its own devices, will ultimately reach equilibrium, and in which money and financial institutions generally play non-essential roles — has not been challenged. Instead, the challenge that is occurring in academic institutions is the survival of the handful of proponents of an alternative paradigm — one that sees capitalism as fundamentally both unstable and monetary. Before the crisis, economists who followed that broad tradition — including myself — were largely ignored by the mainstream. After the crisis, the mainstream could have accepted that this perspective has merit, and made more room for it in the academic curriculum. But instead, what little space was devoted to alternative approaches to economics has been reduced. - See more at: http://www.debtdeflation.com/blogs/2014/08/27/time-for-a-copernican-revolution-in-economics/ Debunking Economics: The Naked Emperor Dethroned? Debunking Economics exposes what many non-economists may have suspected and a minority of economists have long known: that economic theory is not only unpalatable, but also plain wrong. When the original Debunking was published back in 2001, the market economy seemed invincible, and conventional 'neoclassical' economic theory basked in the limelight. Steve Keen argued that economists deserved none of the credit for the economy's performance, and that 'the false confidence it has engendered in the stability of the market economy has encouraged policy-makers to dismantle some of the institutions which initially evolved to try to keep its instability within limits'. That instability exploded with the devastating financial crisis of 2007, and now haunts the global economy with the prospect of another Depression. ----- In this radically updated and greatly expanded new edition, Keen builds on his scathing critique of conventional economic theory whilst explaining what mainstream economists cannot: why the crisis occurred, why it is proving to be intractable, and what needs to be done to end it. ----- Essential for anyone who has ever doubted the advice or reasoning of economists, Debunking Economics provides a signpost to a better future. http://www.amazon.co.uk/Debunking-Economics-Revised-Expanded-Dethroned/dp/1848139926/