Paul Omerod, The Death of Economics (London: Faber & Faber, 1994, 230 pp., UK 6.99)
Reviewed by Scot A. Stradley University of North Dakota
The world should take notice when a book about economic theory and economic history is issued in paperback after being published in hardback. The interpretation of the phenomena is difficult, though. Is it an attempt to lower price to increase the quantity demanded for an otherwise lackluster performance, a marketing plan to expand sales of a differentiated product, or a genuine attempt to respond to the large demand that developed as a consequence of the response to the first edition? This writer believes that the latter is the actual fact.
Such an introduction is appropriate since this book is another contribution to the historical literature produced by doubters and skeptics. The book addresses the history of economic thought as a means of approaching its more serious purpose of evaluating the origins of the present crisis in economic theory regarding its inability to predict economic phenomena. Economics suffers from an adherence to mechanistic modelling in a static framework and fails to consider economic problems from the viewpoint of dynamics rather than statics.
The book is, at least in Part 1, "The Present State of Economics," not original in its viewpoint. Economic theory has a long history of criticism both of its form and its content. Omerod follows much of this tradition without citation in order to advance an argument that economics has become preoccupied with a paradigm of statical mechanics based on intimate connections with the history of science. Further, economic science developed an "abstract" human being, rational economic man, to make its mechanistic explanations of economic behavior work. The model is less than plausible and has failed to successfully predict economic phenomena. Its failure is the source of the current crisis.
This failure is moreover a failure in public policy. Omerod, whose own work must be admired for its mixture of theoretical discussion and historical examination, presents evidence drawn from the major late twentieth century economies that intertwines with his argument that orthodoxy has failed. The greatest danger of this is rightly shown to be misguided public policy makers. Omerod makes a good case that public policy, misled by economists' reliance on general equilibrium models based on the behavior of rational economic man, have generally made mistakes that result from considering only the statical framework. A proper approach to modelling requires incorporating historical perspective to produce a dynamic model, rather than a static model.
Transforming method requires giving up the idea of general equilibrium through time. The perspective is more like that found in biology and geology, and Omerod is to be complimented for using an interdisciplinary approach, where equilibrium is a temporary state of affairs. …