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I don't know anything about the author, but George Mason University itself is tainted by the influence of libertarian money provided by industrialist Charles Koch. He essentially bought the economics department with a gift of $23 million and directed which libertarian economists should be hired using the money. The details are (mostly) on the GMU web site where they brag about the gift.

It is possible that those who want to deal with other formulations of economics have to hide out in other departments as a consequence.

As for the author's thesis, that economics is based upon various axioms and doesn't account properly for externalities this is a well-known criticism discussed originally by those who founded ecological economics, but now spreading elsewhere.

Here's a short reading list of some of the works of the movement's founder Herman Daly (from short to long).

http://dieoff.org/page88.htm
http://www.earthrights.net/docs/daly.html
http://www.feasta.org/documents/feastareview/daly.htm

The other prominent worker in the field is Robert Costanza who runs an institute at the U of Vermont.
http://www.uvm.edu/giee/?Page=about/Robert_Costanza.html&SM=about/about_menu.html

If you want to treat this as a physics problem then standard economics ignores what happens outside the box, while ecological economics treats the whole system.

I wrote an essay here a few months ago framing this idea as a problem in physics:
Non-Adiabatic Economics

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Sat May 24th, 2008 at 03:58:46 PM EST
rdf--I couldn't agree more. Thanks for the reference.

I consider classical economics as equivalent to the simplifying assumptions of the adiabatic gas law..... An... example has to do with competition. The basic understanding is that in a competitive marketplace the price of the item will fall until the marginal cost of producing the next copy of the item will equal the price. In other words none of the firms will be making a profit. It's true that there are sometimes limited price wars of this nature, but in many cases the behavior is not as predicted by theory. Sometimes firms sell at below cost to drive weaker firms out of the market, sometimes they under produce to prevent the cost from dropping too low, sometimes they attempt to create product differentiation perception through advertising so that demand is not uniform. Most common these days is for firms to tacitly agree to divide a market between them using various signaling mechanisms

This was why Marx correctly analyzed COMPETETIVE markets as inherently unstable.  There was also that embarrassing "Labor Theory of Value"---the worst thing since usury laws.  The reformulation of the classical economics of Smith, Ricardo, Bentham Malthus and the Mills was undertaken to remove the stain of having to acknowledge any legitimacy of claims to value from labor.  Actually working with one's hands was so low class--except of course for artists. Elite endeavors should be mental in nature.

The last thing any good businessman wants is to compete on price.  Smith understood this well. He wrote of how, when two tradesmen meet socially, the conversation inevitably turned to limiting competition.  I don't know where the Neo-Classicists incorporated that part of Smith's legacy into their formulas borrowed from Helmholtz.

All of the really interesting phenomena of economics involve "leakage" from the system, often into the pockets of participants in non-legally sanctioned ways. This is discussed, by The Economist, for instance, typically to characterize it as an isolated abberation which has been detected and dealt with severely.  Much of the advertising budget of the major coroporations goes to "celebrating" the wonders of the market. Uh, less so at the moment, but they are concerned that we not overreact and do something rash, especially if it is effective.  Same for Bernanke, et al.

The economics departments mostly teach "mainstream economics" a.k.a. Neo-Classical Economics.  This serves to prepare a new generation of employees for the financial services industry.  Uncritical graduates can look forward to careers in that industry. Employers need not fear too many awkward questions.  More critical graduates may aquire PhDs and, if they are particularly prolific publishers of not too critical academic papers, become the left wing member of some faculty, so that the department can show balance.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun May 25th, 2008 at 02:53:10 PM EST
[ Parent ]
... mainstream economists found out from the inside out that the core theory upon which post-WWII formal neoclassical economics was built, the theory of General Equilibrium, was a dead end.

The problem, of course, was that in giving each distinct good at each distinct location and each distinct time period its own dimension, the GE system has such an extraordinarily large number of dimensions that there are in general, except under highly artificial restrictions, an extremely large number of general equilibria for a given state, and as far as stability, among the equilibria you can find dynamics just about as unstable as possible.

So the wonderful existence of general equilibrium proof of the 1950's was, in the 1970's, shown to be a dead end, in its own terms.

And then ... well, the mainstream project lost its center, but not its allegiance to its own partial unit of analysis and analytical toolkit, having learned how to step carefully around the dead and rotting corpse of GE theory.
 

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sat Jun 21st, 2008 at 03:43:43 AM EST
[ Parent ]
Didn't Arrow himself say something to the effect that the Arrow-Debrau theorem was a mathematical tour de force with little relevance to the real world?

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Sat Jun 21st, 2008 at 05:53:56 AM EST
[ Parent ]
Debreu was one of the three main contributors to the understanding that General Equilibrium theory is a dead end ... Sonnenshein (1972) was generalized by Mantel (1974) and Debreu (1974).

Ackerman, 1999, Still Dead After All These Years (pdf)

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sat Jun 21st, 2008 at 03:41:50 PM EST
[ Parent ]

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