In this stinging critique, the author writes that mainstream economics has lost touch with reality. Economists have cast economics as a “hard science” and have put their trust in mathematical models and the efficiency of free markets. Yet economic dilemmas erupt violently and unexpectedly, such as the global financial crisis of 2007 and 2008, despite economists’ assurances about stability and risk. Papadogiannis contends that this happens because the study of economics operates in a “parallel universe” that’s merely a shadow of how real life works. A number of dubious assumptions, he says, have left economics poorly equipped to explain a complex, chaotic world. Among them is the myth of “Homo economicus”—that people are economic agents who coldly calculate profit and loss for every decision. Citing voluminous research from psychology and the social sciences, Papadogiannis shows that people are seldom purely rational; emotions, biases, and social and political ideas profoundly influence people’s behavior. Add the disruptive nature of technology, and no mathematical formula can possibly capture the messiness of life. The only thing that’s certain, the author says, is another economic calamity. He hammers home this point with a thumbnail history of financial crises, from the 17th century tulip mania to the Great Recession of 2009. It reveals a pattern of boom-and-bust money-grubbing and misfortune that illustrates how academic theories crumble before human folly. The book’s true value is in how it challenges the so-called experts; like a dogged skeptic, Papadogiannis raises razor-sharp questions to expose flawed thinking (“Why did [economics] stubbornly ignore reality and get trapped on a lonely path?”), and in doing so, he accomplishes a rare feat: an economics text that will hold the attention of noneconomists. Richly sourced and strongly argued, his book is an attack on humanity’s self-deceiving faith in its own abilities. The author doesn’t deny the value of economics but rather urges its practitioners to widen their vision. The economy, in his view, is a many-sided beast driven by passions, expectations, fear and greed—just like the people who comprise it.
A forceful economics text that tells a damning tale of hubris.