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👎💲 Against Economics by David Graeber

🤖 AI Summary

• 🧪 Economics is a science designed to solve problems that no longer exist, evidenced by the obsession with inflation despite central banks printing money without causing it [01:39].
• 📉 Falling unemployment no longer drives up wages, and printing money does not cause inflation, yet textbooks and public debate remain unchanged [01:54].
• 📚 The discipline is taught like physics—a realization of universal mathematical truths—rather than a story of arguments like other social sciences [02:40].
• 🔓 Heterodox theories are locked out of serious departments, despite often having a better record of predicting real-world events [03:20].
• 🧠 Mainstream neoclassical economics’ basic psychological assumptions have been disproved by psychologists but still colonize the academy [03:45].
• 💰 The claim there is no magic money tree is untrue, as modern money is credit, and banks create money literally out of nothing by making loans [05:04].
• 🏦 The Bank of England officially rejected reigning monetarist orthodoxy, clarifying that private banks create money, and central banks do not control the money supply [08:12].
• 💸 Government borrowing creates entirely new money, contradicting the false premise that it merely diverts funds from the private sector [08:50].
• ⚔️ The war between theoretical perspectives hinges on the nature of money: is it a physical commodity or a social credit arrangement? [13:40].
• 🛑 The Quantitative Theory of Money QTM is wrong, as doubling the amount of gold will have no effect on prices if the rich hoard the money [17:30].
• 😠 Income tax, a crucial innovation, allows leaders to pretend to advocate for small government by making the bureaucratic process intrusive [23:27].
• 💡 The neoclassical counter-revolution demanded macroeconomics be microfounded, reducing national economies to the aggregate of individual decisions, rooted in hostility to the idea of collective good [26:41].
• 🎭 The core of microeconomics relies on assuming purely rational, self-interested actors with complete information, allowing precise predictive equations untested against actual human behavior [27:45].
• 💥 The Efficient Market Hypothesis EMH ruled out bubbles a priori, making the 2008 crash impossible for officials like Alan Greenspan to identify [32:43].
• 🛠️ The current discipline is a shed full of broken tools, designed for last century’s problems—optimal distribution—rather than current ones like technological productivity and care management [35:33].
• 🧬 A new viable science must draw on feminism, behavioral economics, psychology, and anthropology to create theories based on how people actually behave [36:13].

🤔 Evaluation

• ✅ Highly reliable sources, including an official 2014 publication by the Bank of England in their Quarterly Bulletin, confirm the video’s central claim: commercial banks create money by making loans, entirely debunking the traditional money multiplier model.
• ⚖️ While the video emphasizes the radical nature of the critique Post-Keynesian thought, the International Budget Partnership notes that critics find Robert Skidelsky’s analysis partisan in favor of government activism, mirroring the partisanship of new classical theorists favoring the minimal state.
• 🧠 The reliance of neoclassical models on the unrealistic assumption of perfect rationality, or homo economicus, is widely criticized by academic sources for favoring mathematical elegance over empirical relevance.

Topics for Further Exploration

• 📈 The rise and debate surrounding Modern Monetary Theory MMT, which directly addresses the government’s ability to create money via sovereign spending.
• 🎓 Specific reforms needed to overhaul economics education to encourage theoretical pluralism beyond the general call for a new science.
• 🌍 The practical policy implications and feasibility of proposals like the four-day work week or a green industrial revolution in diverse national economies.

❓ Frequently Asked Questions (FAQ)

❓ Q: What is the true mechanism of money creation in the modern economy?

🏦 A: The vast majority of money in circulation is created by commercial banks when they issue loans, not by the government or the central bank printing cash. 📝 This process is known as endogenous money creation, where a new deposit is created simultaneously with the loan being granted.

❓ Q: Why did orthodox economists fail to predict the 2008 financial crisis?

💥 A: The failure stemmed primarily from the profession’s adherence to the Efficient Market Hypothesis EMH, which states that all available information is already reflected in asset prices, making asset bubbles theoretically impossible to identify a priori [32:43].

❓ Q: What is the fundamental problem with the core assumptions of neoclassical economics?

🎭 A: The models rely on assuming purely rational, self-interested actors with complete information, a concept called homo economicus. 🛑 This assumption is not tested against actual human behavior, which behavioral economics and psychology have demonstrated to be fundamentally irrational and context-driven [27:45].

📚 Book Recommendations

↔️ Similar

• 📚 🏛️💰 Debt: The First 5,000 Years by David Graeber explores the historical relationship between debt, money, and social organization, challenging the myth that money originated as barter.
• 💰📉➡️📈🗳️ The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy by Stephanie Kelton offers a framework MMT that aligns with the video’s recognition of money as government credit and its endogenous creation.

🆚 Contrasting

• 📚 The Road to Serfdom by F A Hayek provides the classic argument for free markets and against central planning or expansive government intervention, representing the core monetarist/neoclassical philosophy the video critiques.
• 📚 Basic Economics A Common Sense Guide to the Economy by Thomas Sowell offers a defense of fundamental market principles and rational self-interest, largely bypassing academic jargon to explain the mechanisms that orthodox economists typically advocate.

🎨 Creatively Related

• 🤔🐇🐢 Thinking, Fast and Slow by Daniel Kahneman explores the two systems that drive human thought—System 1 intuitive and System 2 deliberate—providing the psychological basis for why the rational actor assumption of economics is flawed.
• 🐻 Animal Spirits How Human Psychology Drives the Economy and Why It Matters for Global Capitalism by George A Akerlof revives Keynes’ concept of animal spirits to show how non-rational factors like confidence, fairness, and corruption are crucial, often ignored drivers of macroeconomic phenomena.