Zombie Economics – How Dead Ideas Still Walk Among

“Killing vampires and werewolves is easy enough, but how does one slay economic zombies?” (Brad Delong, University of California)

This article and book review on Zombie Economics is another in our series encouraging self-education about the world of economics and finance. You won’t necessarily agree with everything you read in this series, but that’s precisely the point. Economics involves the complexity of human decision-making, mixed with political philosophies and deeply held ideologies. People often make the mistake of believing it’s just about mathematical formulae and statistics.

This month, we’re exploring the views of a famous Australian economist, John Quiggin. His opinions are often controversial and always worth reading.

Our starting point is to ask whether you’ve ever heard of the term “neoliberalism”? It doesn’t have a generally accepted rigorous definition. However, it could be described as an economic philosophy, initially developed in the 19th century and variously associated with a belief in the supremacy of so-called “free markets”, deregulation, privatisation, small government, lower taxes, free trade and globalisation.

Sound familiar? It should. That’s because neoliberal economic policies have influenced the actions and decisions of most Western governments since the 1970s. In fact, it would be not unreasonable to suggest the world in which we live has been substantially shaped by neoliberalism, for better or for worse.

In recent times, the excesses of neoliberalism have been identified by many commentators as the root cause of the global financial crisis of 2008. Prominent amongst the critics has been Australian academic, Professor John Quiggin. In the several editions of his entertaining (and now classic) book Zombie Economics, Quiggin outlines how dead economic ideas still walk among us and why they must be killed off if we are to avoid another major financial crisis. To use his colourful turn of phrase “In the graveyard of economic ideology, dead ideas still stalk the land”.

Quiggin proposes “a response that must begin by reasserting the crucial role of the state in risk management. If individuals are to have security of employment, income and wealth, governments must act to establish and enforce the necessary legal and economic frameworks……to mitigate inequalities in both opportunities and outcomes….a positive response should combine better social provision to help people deal with risk at the individual and family level with a return to active use of fiscal as well as monetary policy to stabilise the aggregate economy”.

In summary, Quiggin proposes a bigger role for the government in directing Western economies and the distribution of income, wealth and opportunities. You can imagine how that idea might not be well received in some circles. How do you feel about it?

If you’d like to test your understanding of economics and learn more about the financial world in which we live, you will enjoy this book. You may not agree with everything Quiggin says, but he will certainly challenge you to think about and justify your current opinions. In the words of the current Australian MP and former Economics professor, Andrew Leigh, Zombie Economics is “a terrific book….quite a page-turner”.