Why Extreme Inequality Causes Economic Collapse

Yves here. Evonomics made this comment at the end of Sally Goerner’s post:

John Fullerton’s white paper, Regenerative Capitalism, lists eight principles critical to systemic economic health. The Capital Institute’s research group, RARE[1], uses recent scientific advances – specifically, the physics of flow[2]– to create a logical and measurable explanation of how these principles work to make or break vitality in the human networks of which economies are built.

I hate to come off like a nay-sayer, because I have no doubt that the underlying methodology is useful. But this sounds an awful lot like a new improved version of system dynamics, which the economics profession successfully beat back in the 1970s. As we discussed long form in ECONNED, orthodox economics rests on the assumption that economies have a natural propensity to equilibrium, and that equilibrium is full employment. As Paul Samuelson stressed, that assumption is necessary for economics to be science, as in mathed up, and the dominance that economists have achieved is due to their scientific appearances and the fact that their mathematical exposition enables them to dismiss lay critics.

– Naked Capitalism

Read the full article here.