Who Are These Economists, Anyway?


by James K. Galbraith* 

Of course, there were exceptions to these trends: a few economists challenged the assumption of rational behavior, questioned the belief that financial markets can be trusted and pointed to the long history of financial crises that had devastating economic consequences. But they were swimming against the tide, unable to make much headway against a pervasive and, in retrospect, foolish complacency.Paul Krugman, New York Times, September 6, 2009

Amen.

While normal ecclesiastic practice places this word at the end of the prayer, on this occasion it seems right to put it up front. In two sentences, Professor Paul Krugman, Nobel Laureate in Economics for 2008 and in some ways the leading economist of our time, has summed up the failure of an entire era in economic thought, practice, and policy discussion.

And yet, there is something odd about the role of this short paragraph in an essay of over 6,500 words. It’s a throwaway. It leads nowhere. Apart from one other half-sentence, and three passing mentions of one person, it’s the only discussion—the one mention in the entire essay—of those economists who got it right.Their work is not cited.

 

Their story remains untold. Despite having been right on the greatest economic

question of a generation—they are unpersons in the tale.

 

Krugman’s entire essay is about two groups, both deeply entrenched at (what they believe to be) the top of academic economics. Both are deeply preoccupied with their status and with a struggle for influence and for academic power and prestige—against the other group. Krugman calls them “saltwater” and “freshwater” economists; they tend to call themselves “new classicals” and the “new Keynesians”– although one is not classical and the other is not Keynesian. One might speak of a “Chicago School” and an “MIT School”—after the graduate programs through which so many passed. In truth, there are no precise labels, because the differences between them are both secondary and obscure.

The two groups share a common perspective, a preference for thinking along

similar lines. Krugman describes this well, as a “desire for an all-encompassing,

intellectually elegant approach that also gave economists a chance to show off

their mathematical prowess.” Exactly so. It was in part about elegance—and in

part about showing off. It was not about … the economy. It was not a discussion

of problems, risks, dangers, and policies. In consequence, the failure was shared by

both groups. This is the extraordinary thing. Economics was not riven by a feud

between Pangloss and Cassandra. It was all a chummy conversation between

Tweedledum and Tweedledee. And if you didn’t think either Tweedle was worth

much—well then, you weren’t really an economist, were you?

 

Professor Krugman contends that Tweedledum and Tweedledee “mistook

beauty for truth.”The beauty in question was the “vision of capitalism as a perfect

or nearly perfect system.” To be sure, the accusation that a scientist—let alone an

entire science—was seduced by beauty over truth is fairly damaging. But it’s worth

asking, what exactly was beautiful about this idea?

 

Krugman doesn’t quite say. He does note that the mathematics used to

describe the alleged perfection was “impressive-looking”—”gussied up” as he says,

“with fancy equations.” It’s a telling choice of words. “Impressive-looking”?

“Gussied up”? These are not terms normally used to describe the Venus de Milo.

 

To be sure, mathematics is beautiful, or can be. I’m especially fond of the complex

geometries generated by simple non-linear systems.The clumsy mathematics of

the modern mainstream economics journal article is not like this. It is more like a

tedious high school problem set.The purpose, one suspects, is to intimidate and not

to clarify. And with reason: an idea that would come across as simple-minded in

English can be made “impressive-looking” with a sufficient string of Greek symbols.

Particularly if the idea—that “capitalism is a perfect or nearly-perfect system” would

not withstand the laugh test once stated plainly.

 

As it happens, the same John Maynard Keynes of whom Krugman speaks

highly in his essay, had his own view of the triumph of the economists’ vision—

specifically that of the first great apostle of drawing policy conclusions by deduc-

Economics was not riven by a feud between Pangloss and Cassandra. It was all a chummy conversation between Tweedledum and Tweedledee. deductive reasoning from first principles, that of David Ricardo over Thomas Robert

Malthus. Keynes wrote:

 

It must have been due to a complex of suitabilities in the doctrine to the environment

into which it was projected. That it reached conclusions quite different

from what the ordinary uninstructed person would expect added, I suppose, to its

intellectual prestige. That its teaching, translated into practice, was austere and

often unpalatable, lent it virtue. That it was adapted to carry a vast and logical

superstructure, gave it beauty. That it could explain much social injustice and

apparent cruelty as an inevitable incident in the scheme of progress, and the attemp

to change such things as likely on the whole to do more harm than good, commended

it to authority. That it afforded a measure of justification to the free activities

of the individual capitalist, attracted to it the support of the dominant social

force behind authority.1

 

Note that Keynes does not neglect the element of beauty. But he embeds this

point in a much richer tapestry of opportunism, venality, and apologetics. To this

day, seduction-by-deduction is known, in some corners of economics at least, as

“the Ricardian Vice.” Keynes also wrote:

 

“But although the doctrine itself has remained unquestioned by orthodox

economists up to a late date, its signal failure for purposes of scientific prediction

has greatly impaired, in the course of time, the prestige of its practitioners. For professional economists… were apparently unmoved by the lack of correspondence

between the results of their theory and the facts of observation;—a discrepancy

which the ordinary man has not failed to observe…”2

 

Nothing much changes, and it is interesting to ask, why not? The reason is not that there has been no recent work into the nature and causes of financial collapse. Such work exists. But the lines of discourse that take up these questions have been marginalized, shunted to the sidelines within academic economics. Articles that discuss these problems are relegated to secondary journals, even to newsletters and blog posts.The scholars who betray their skepticism by taking an interest in them are discouraged from academic life—or if they remain, they are sent out into the vast diaspora of lesser state universities and liberal arts colleges. There, they can be safely ignored.

 

Let us venture out into the nether wastes of economics, and attempt a brief

To this day, seduction-by-deduction is known, in some corners of economics at least,

as ‘the Ricardian Vice.’ survey of the main currents that didn’t get it wrong. My method here is far from comprehensive. It consists of surveying my own habitual reading, augmented by suggestions from a large list of economists—almost none of them in so-called “top departments.” Many of the examples given below were volunteered, at my request, by their authors or by admirers of those authors. And numerous examples are not cited, for want of space.3

 

1 . H A B I T U A L C A S S A N D R A S : T H E  M A R X I A N  V I EW

 

For a generation or more—as a relic of the radical movements of the 1960s, at

a time when Keynesianism was King—the token dissident tolerated in many

economics departments has been a strand of Americanized Marxism, much of it

developed in the 1970s at the University ofMassachusetts-Amherst, after the radicals

were expelled from Harvard. For this tradition, class struggle and power relations

generally remain at the heart of economic analysis, and crisis is inevitable—

sometime.

 

The South African economist Patrick Bond in 2004 summarized the major

Marxian crisis-is-inevitable arguments as being of two major types: one based on

cut-throat competition, represented by Robert Brenner, and another based on the

over-accumulation of capital, typified by EllenWood and David Harvey with various

dissenting or qualifying views, including Giovanni Arrighi. In a paper that

gives the financial history of the recent crisis in detail, Brenner recapitulates that

the crisis “manifests huge, unresolved problems in the real economy that have been

literally papered over by debt for decades, as well as a financial crunch of a depth

unseen in the postwar epoch.”4

 

The focus on an underlying “real economy” means that the radical tradition

does not truly provide a theory of financial crisis. In this respect, the radicals

resemble the mainstream: for them, finance is largely a veil over deeper forces.

Thus, the specific character of the impending crisis, and the way it might arrive, is

not terribly important. (In 2004, the crisis Bond anticipated would be set off by a

collapse of the dollar, due to unsustainable US current account deficits and the

exhaustion of the American imperial mission in Iraq. This was one crisis that

might have happened, but so far has not.) The radicals also lack interest in policy:

at the heart of things, they do not believe the existing system can be made to work.

 

2 . T H E P R A C T I C E O F B U B B L E – D E T E C T I O N .

 

Asecond perspective seeks to identify financial bubbles—the peculiar indicia of

an imminent crash. Dean Baker of the Center for Economic and Policy

Research in Washington is the pre-eminent practitioner of this craft, with a clear

claim to having seen the housing bubble when academic economists largely could

not. As far back as 2002, Baker wrote:

 

“If housing prices fall back in line with the overall rate price level, as they have

always done in the past, it will eliminate more than $2 trillion in paper wealth and

considerably worsen the recession. The collapse of the housing bubble will also

jeopardize the survival of FannieMae and FreddieMac and numerous other financial

institutions.”5

 

This was spot on,6 by a simple method. It is to identify economic indicators—

usually a ratio of two underlying variables—that are departing sharply from their

historical norms, so as to suggest a temporary and unsustainable condition. An

example would be the price/earnings ratio in the stock market, say for technology

stocks in the late 1990s. More recent analogs include the price/rental ratio in the

housing market, the ratio of housing price changes to inflation, the vacancy rate,

and so forth. (The extent of deviation, coupled to the scale of the housing stock,

gives a measure of the scale of the bubble itself—something Baker eventually calculated at about eight trillion dollars for housing.)

 

Underlying this method is the idea that market institutions and relationships are

generally stable, in the sense that normal values exist. That being so, the most likely

thing, when a ratio of this kind departs radically from its normal ranges, is that

it will return to them eventually—and in a rush.The departure is a bubble and the

The radicals also lack interest in policy: at the heart of things, they do not believe

the existing system can be made to work.

 

A New Progressi ve Era for Higher Educat ion rush is a crash. Those who bought high will be forced to sell low, and therefore ruined—something against which Baker warned repeatedly for six years.

 

The method of bubble-detection has an important virtue: it works, much of

the time. But the method does not depend in a systematic way on theory.The possibility exists, in any particular case, that it will fail. Institutional relationships—

the “normal” p/e or price/rental ratio—might change. It is not quite enough to

assert, in effect, that the claims of history are eternal. Maybe there is a “New

Paradigm” at work, after all.

 

3 . K E Y N E S L I N E S S I S N E X T TO GODLE Y N E S S .

 

The work of John Maynard Keynes is linked closely to the accounting framework

that we call the National Income and Product Accounts. Total product

is the flow of expenditures in the economy; the change in that flow is what we call

economic growth. The flow of expenditures is broken into major components:

consumption, investment, government and net exports, each of them subject to

somewhat separable theories about what exactly determines their behavior.7

Accounting relationships state definite facts about the world in relational

terms. In particular, the national income identity (which simply states that total

expenditure is the sum of its components)8 implies, without need for further proof,

that there is a reciprocal, offsetting relationship between public deficits and private

savings. To be precise, the financial balance of the private sector (the excess of

domestic saving over domestic investment) must always just equal the sum of the

government budget deficit and the net export surplus. Thus increasing the public

budget deficit increases net private savings (for an unchanged trade balance), and

conversely: increasing net private savings increases the budget deficit.

 

The Cambridge (UK) economist Wynne Godley and a team at the Levy

Economics Institute have built a series of strategic analyses of the U.S. economy

on this insight, warning repeatedly of unsustainable trends in the current account

and (most of all) in the deterioration of the private financial balance.9 They

showed that the budget surpluses of the late 1990s (and relatively small deficits in

the late 2000s) corresponded to debt accumulation (investment greater than savings)

in the private sector. They argued that the eventual cost of servicing those

liabilities would force private households into financial retrenchment, which

would in turn drive down activity, collapse the corresponding asset prices, and cut

Total product is the flow of expenditures in the economy; the change in that flow is what we call economic growth.

tax revenues. The result would drive the public budget deficits through the roof.

And thus—so far as the economics are concerned—more or less precisely these

events came to pass.

 

Godley’s method is similar to Baker’s: an unsustainable condition probably

exists when an indicative difference (or ratio) deviates far from prior values. The

difference is that Godley’s approach is embedded explicitly in a framework of

accounts, so that there is a structured approach to figuring out what is and what is

not tolerable. This is a definite advance.

 

For example: public sector surpluses were (not long ago) driven by private-sector

debt accumulation. This raises the question, how can such accumulation be

sustained and what happens when it stops? Conversely in a downturn: very large

public-sector deficits are made inevitable by the private-sector’s return to net

saving. But how long will public policymakers, unaccustomed to thinking about

these relationships, tolerate those deficits? The question is important, since if for

political reasons they do not, the economy may collapse.

 

On the international side, the willingness of foreigners to hold US government

bonds as reserve assets creates a counterpart in the U.S. public deficit: U.S.

budget deficits are inevitable so long as the world wishes to add to its reserves of

Treasury bonds. But this raises another focused question: what drives the reserve

asset decisions of foreign central banks? In this way, the Godley framework very

usefully concentrates our attention on the critical questions: the things we know

about, and things we need to know about.

 

4 . MI N S K Y A ND NON – L I N E A R  F I NA N C I A L  DYNAMI C S

 

The work of Hyman Minsky approaches the problem of financial instability

from a different angle. Minsky’s core insight was that stability breeds instability.

10 Periods of calm, of progress, of sustained growth render financial market

participants malcontent with the normal rate of return. In search of higher returns,

they seek out greater risk, making bets with greater leverage. Financial positions

previously sustainable from historical cash flows—hedge positions—are replaced

by those which, it is known in advance, will require refinancing at some future

point. These are the speculative bets. Then there is an imperceptible transition, as

speculative positions morph into positions that can only be refinanced by new

borrowing on an ever-increasing scale. This is the Ponzi scheme, the end-stage,

Godley’s method is similar to Baker’s: an unsustainable condition probably exists when an indicative difference (or ratio) deviates far from prior values.

A New Progressi ve Era for Higher Education which must collapse once it is recognized to exist. Minsky’s analysis showed that capitalist financial instability is not only unavoidable, but intrinsic: instability arises from within, without requiring external disturbances or shocks.”There is no such thing as an equilibrium growth path,indefinitely sustained. Short of changing the system, the public responsibility is toregulate financial behavior, limiting speculation and stretching out for as long as possible the expansionary phase of the cycle.

 

A strong line of descent runs from Minsky to recent work in non-linear

dynamics, for example the work of Peter Albin, Barkley Rosser, jr. and Ping

Chen.11 A key property of non-linear systems is the appearance within them of

phase transitions: from single equilibria, to two- four- and eight-period repeating

cycles, and finally to deterministic chaos. These phase transitions—analogous

to the solid-liquid-gas phases of water and other chemicals—are qualitatively

distinct, internally stable, and characterized by definite boundaries. The

crossing of a boundary, we are now given to understand, is never a “new paradigm.”

It is merely the change of a single integrated system from one state to

another.Thus the regulatory problem can be seen as that of maintaining the system

within a stable (and relatively desirable) phase—either hedge or speculative—

and well away from the phase boundary associated with Ponzi finance and

inevitable collapse.

 

It’s a simple idea. But it played no role in the mainstream’s thinking about the

appropriate posture of policy toward financial crisis. Ping Chen first quotes and

refutes Robert Lucas, the leading Chicago-school economist, on this point:

‘The main lesson we should take away from the EMH for policymaking purposes

is the futility of trying to deal with crises and recessions by finding central

bankers and regulators who can identify and puncture bubbles. If these people exist,

we will not be able to afford them.’ This is the Lucas impossibility theorem in crisis

management. However, this impossibility theorem has … obvious flaws. First,

there are reliable methods to identify and punch asset bubbles in our theory of the

viable market … For example, sudden changes of trading volumes in Wall Street

signal speculative activities by big investors and herd behavior of noise traders.The

regulating agency could easily take counter-cyclic measures, such as increasing the

capital reserve requirement, restricting leverage ceiling, increasing the transaction

tax rate.12

 

Minsky’s analysis showed that capitalist financial instability is not only unavoidable, but intrinsic: instability arises from within.

 

In the mainstream, insouciance and fatalism combined to justify inaction.This

pattern explains the pathological willingness of some economists—Lawrence

Summers—to countenance the dismantling of regulatory barriers (such as Glass-

Steagall) that helped keep the system shy of the Ponzi phase. It shows up as

grotesque in Alan Greenspan’s public encouragement for the mass adoption of

speculative mortgages. Clearly, incorporating Minsky-thought into regulatory

practice would be an enormous advance. But it would still leave an open question:

how exactly do we decide which regulations to adopt?

 

5 . G A L B R A I T H , I N S T I T U T I O N A L F O R M , A N D  T H E  NEW C R I M I N O L O G Y

 

The point of departure for work in this area is John Kenneth Galbraith’s magnum

opus, The New Industrial State.13  A huge popular success when it

appeared in 1967, this book was the target of a sustained and largely successful

assault by mainstream economists, and it disappeared from view during the neoliberal

revival. It represented a vast threat to their modes of thought, for it sought to

replace (in part) an economics of markets with an economics of organizations—of

corporations, governments, unions and other parties, with the focus on internal

structures of governance, countervailing power and the efficacy of group effort

toward shared objectives.

 

In The Predator State, 14 , I argue that after 1970 the large American corporation

was pushed into crisis by stop-go,macroeconomic policies, international competition,

technological change and, especially, the weakening of internal controls

over the abuse of the corporate form by executive officers within the firm. In

financial firms, it is precisely the weakening or corruption of controls, both internal

and those imposed by external regulation, that leads toward disaster.

 

For this kind of work, close observation can be superior to statistics. Gary Dymski’s 2005 examination of sub-prime credit markets provides an example, and

demonstrates that it was very far from impossible to foresee the crisis. It was

entirely sufficient just to look:

 

…The likelihood in market after market is that potential borrowers will break

into two prototypical groups: one group whose assets and position are secure … and

a second group, whose wealth levels are so low that contracts are written with the

In financial firms, it is precisely the weakening or corruption of controls, both internal and external, that leads toward disaster.

hope of extracting sufficient returns in the short run to compensate for what will

inevitably be (for most) longer term insolvency problems…The financial crisis that

is familiar from Minsky’s work involves the collapse of expectations and of conditions

for refinancing in the formal market … A second type of crisis, however,

involves a collapse of the conditions required for financial reproduction in the

informal market. …. This does not mean that these participants will cease to function

or to borrow: they have no choice but to borrow and to get ever deeper into

hopelessly high levels of debt.When asset exhaustion makes it impossible to renew

activities, so that more time cannot be bought, then life and financial crisis can

become indistinguishable.15

 

Dymski’s work also identified at an early stage the class- and race-based

strategies of the major banks and mortgage-originators as they laid their traps for

the meager assets of the poor. It raises, inevitably, the question of responsibility.

And this brings us to an important line of new research, focused on economic

behavior and the law, and specifically on the conditions that generate epidemics of

financial fraud.

 

In this area a key references isWilliam K. Black’s16 systematic study of the savings

and loan crisis and his development of the concept of “control fraud”—fraud

committed on organizations by those who control them.17 An effort to bring this

to the attention of mainstream economists also exists, in the work of Akerlof and

Romer,18 itself greatly informed by Black’s practical experience as an investigator

and whistle-blower in the savings and loan affair.

 

In the present crisis, the vapor trails of fraud and corruption are everywhere: from

the terms of the original mortgages, to the appraisals of the houses on which

they were based, to the ratings of the securities issued against those mortgages, to

gross negligence of the regulators, to the notion that the risks could be laid off by

credit default swaps, a substitute for insurance that lacked the critical ingredient of

a traditional insurance policy, namely loss reserves. None of this was foreseen by

mainstream economists, who generally find crime a topic beneath their dignity. In

unraveling all this now, it is worth remembering that the resolution of the savings

and loan scandal saw over a thousand industry insiders convicted and imprisoned.

 

Plainly, the intersection of economics and criminology remains a vital field for

research going forward.

 

None of this was foreseen by mainstream economists, who generally find crime a topic beneath their dignity.

 

6 . C O N C L U S I O N S

 

Paul Krugman did great service by training his guns on the failures of the club

of which he has been, for many years, a most distinguished member. So, I am

inclined to forgive the headline writer of The New York Times Sunday Magazine

for borrowing, almost word for word, the title of an article of mine—published

nine years previously. I nevertheless will not resist the temptation to quote my

own words from back then:

 

Leading active members of today’s economics profession… have formed

themselves into a kind of Politburo for correct economic thinking. As a general

rule—as one might generally expect from a gentleman’s club—this has placed them

on the wrong side of every important policy issue, and not just recently but for

decades. They predict disaster where none occurs. They deny the possibility of

events that then happen. … They oppose the most basic, decent and sensible

reforms, while offering placebos instead. They are always surprised when something

untoward (like a recession) actually occurs. And when finally they sense that

some position cannot be sustained, they do not reexamine their ideas. They do not

consider the possibility of a flaw in logic or theory. Rather, they simply change the

subject. No one loses face, in this club, for having been wrong. No one is dis-invited

from presenting papers at later annual meetings.And still less is anyone from the

outside invited in.19

 

This remains the essential problem. As I have documented—and only in part—

there is a considerable, rich, promising body of economics, theory and evidence,

entirely suited to the study of the real economy and its enormous problems. This

work is significant in ways in which the entire corpus of mainstream economics—including recent fashions like the new “behavioral economics”— simply is not. But where is it inside the economics profession? Essentially, nowhere.

 

It is therefore pointless to continue with conversations centered on the

conventional economics.The urgent need is instead to expand the academic space

and the public visibility of ongoing work that is of actual value when faced with

the many deep problems of economic life in our time. It is to make possible careers

in those areas, and for people with those perspectives, that have been proven worthy

by events. This is—obviously—not a matter to be entrusted to the economics

departments themselves. It is an imperative, instead, for university administrators,

for funding agencies, for foundations, and for students and perhaps their parents.

The point is not to argue endlessly with Tweedledum and Tweedledee. The point

is to move past them toward the garden that must be out there, that in fact is out

there, somewhere.

 

E N D  N O T E S

 

  1. Keynes, The General Theory of Employment, 1936.
  2. Ibid.
  3. I pass over the world of business economists, including Nouriel Roubini, whose methods I cannot clearly discern, and NassimTaleb, whose nihilism in this case seems to me excessive, in suggesting that things cannot be predicted when in fact they were. I also do not deal here with grand theorists, such as Paul Davidson (see Bibliography) or Joseph Stiglitz. Both offer general reasons to expect crisis, but less on the specific causes of the present one.
  4. Bond, “Crunch time for US Capitalism?” 2004; Brenner, The Boom and the Bubble, 2003;Wood, Empire of Capital, 2005; Harvey, The New Imperialism, 2005; Arrighi, “The Social and Political Economy of Global Turbulence,” 2003; Brenner, “The Origins of the Present Crisis,” 2009.
  5. Baker, “The Run Up in Home Prices,” 2002.
  6. As was Jane D’Arista, in work based on the flow of funds: “…The bursting of the mortgage bubble could unleash broader financial disruptions with deeper macroeconomic implicationsthan the shakeout following the S&L crisis of the 1980s.” (see Works Cited)
  7. AsMirowski pointed out, one may consider that in Keynes’s economics, total expenditure is the standard-of-value for which the equivalent in earlier theories was gold or labor or psychological welfare. (see Works Cited)
  8. C+I+G+X-M=Y. In the standard notation, Y is income, C is consumption, I is investment, G is government spending, X is exports,M is imports,T is total tax revenue, and S is saving. The second relationship is (S-I) = (G-T) + (X-M), where S is defined as Y-C-T. To know any two of the terms within brackets is, by definition, to know the third.
  9. Godley, “Prospects for the United States and the World,” 2008.
  10. Minsky, Stabilizing an Unstable Economy, 2008.
  11. Albin, Barriers and Bounds to Rationality, 1998; Rosser, et. al., “The Period of Financial Distress in Speculative Markets”, forthcoming; Chen, Micro interaction, forthcoming.
  12. Chen, Micro interaction, forthcoming.
  13. Galbraith, The New Industrial State, 2007.
  14. Galbraith, The Predator State, 2008.
  15. Dymski, “Financial Globalization, Social Exclusion and Financial Crisis,” 2005.
  16. Black, The Best Way to Rob a Bank is to Own One, 2005.
  17. There are important parallels between the study of organizational looting in advancedWestern and decrepit Eastern economies, developed by Janine Wedel (see Works Cited).
  18. Akerlof and Romer, “Looting: The Economic Underworld of Bankruptcy for Profit,” 1-74.
  19. Galbraith, “How The Economists Got it Wrong,” 2000.

 

B I B L I O G R A P H Y

 

Akerlof,George & PaulM. Romer. “Looting:The Economic Underworld of Bankruptcy for Profit,” Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24, 1993.

Albin, Peter S. Barriers and Bounds to Rationality, Princeton: Princeton University Press, 1998.

Arrighi, Giovanni. “The Social and Political Economy of Global Turbulence.” New Left Review (March-April 2003).

Baker, Dean. “The Run Up in Home Prices: Is It Real or Is It Another Bubble?” August 5, 2002. www.cepr.net/documents/publications/housing_2002_08.htm.

mm-T&A09GalbraithSF.qxp:Layout 1 11/10/09 3:40 PM Page 96

Black,William K. The BestWay to Rob a Bank is to Own One. Austin: University of Texas Press, 2005.

Bond, Patrick. “Crunch time for US Capitalism?” Z-Net Commentary. December 4, 2004.

Brenner, Robert. The Boom and the Bubble. New York: Verso, 2003.

Brenner, Robert. “The Origins of the Present Crisis.” 2009.  www.sscnet.ucla.edu/issr/cstch/.

Chen, Jing and James K. Galbraith. “A Biophysical Approach to Production Theory,” University of Texas Inequality Project Working Paper 55 (February 2009).

Chen, Ping. Micro interaction, meso foundation, and macro vitality. (forthcoming).

D’Arista, Jane. “The Overheated Mortgage Machine,” Flow of Funds Review & Analysis. December, 2002.

Davidson, Paul. Financial Markets,Money and the Real World. London: Edward Elgar, 2003.

Dymski, Gary. “Financial Globalization, Social Exclusion and Financial Crisis,” International Review of Applied Economics 19, no. 4 (October 2005): 439-457.

Galbraith, James K. “How The Economists Got it Wrong,” The American Prospect. February, 2000.

Galbraith, James K. The Predator State. New York: Free Press, 2008.

Galbraith, John Kenneth. The New Industrial State. Princeton: Princeton University Press, 2007.

Godley, Wynne. “Prospects for the United States and the World: A Crisis That Conventional Remedies Cannot Resolve.” Levy Economics Institute Strategic Analysis. December, 2008. www.levy.org.

Harvey, David. The New Imperialism. Oxford: Oxford University Press, 2005.

Keynes, John M. The General Theory of Employment Interest and Money. London: MacMillan, 1936.

Krugman, Paul. “How Did Economists Get it So Wrong?” New York Times Sunday Magazine, September 6, 2009.

Minsky, Hyman P. Stabilizing an Unstable Economy. New York: McGraw-Hill, 2008.

Mirowski, Philip. More Heat Than Light. New York: Cambridge University Press, 1991.

Rosser, Barkley jr., Mauro Gallegati and Antonio Palestrini. “The Period of Financial Distress in Speculative Markets: Interacting Heterogeneous Agents and Financial Constraints” Macroeconomic Dynamics. (forthcoming). Available: http://cob.jmu.edu/rosserjb.

Wedel, Janine. Collision and Collusion: The Strange Case of Western Aid to Eastern Europe. London: Palgrave-MacMillan, 2001.

Wood, Ellen Meikskins. Empire of Capital. New York: Verso, 2005.

—————————————-

*James K.Galbraith holds the LloydM. Bentsen, jr. Chair in Government/Business Relations at the Lyndon B. Johnson School of Public Affairs, The University of Texas at Austin, and is a senior scholar at the Levy Economics Institute of Bard College. His most recent book is The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too. In the early 1980s he served as executive director of the Joint Economic Committee of the U.S. Congress, and he holds a Ph.D. in economics from Yale.