Toxic Economic Theory, Fraudulent Accounting Standards, and the Bankruptcy of Economic Policy

Exposes two fundamental theoretical errors responsible for the bankruptcy of modern economic policy. Toxic economic theory originates from its misconceived division into separate micro- and macro- compartments. It is responsible for fraudulent accounting standards, a dysfunctional system of taxation, and totally bankrupt macroeconomic policy. Toxic economic theory originates from its 'schizophrenic' division into separate macro- and macro- compartments. The microeconomic market-value fallacy - by ignoring the macroeconomic repercussions - fosters the delusion that an increase in market value necessarily represents a gain in real wealth. This fallacy is responsible for fraudulent 'fair value' accounting standards and for an epidemic of 'balance-sheet myopia'. In creating an unsustainable pyramid of ever-increasing loans secured on ever-rising house-prices, it is the root cause of the current economic crisis. The macroeconomic single-gear fallacy - by disregarding the microeconomic foundations - encourages the misconception that the economy is a single-gear machine requiring no more than the lubrication of free competition for operation at its full employment potential. This fallacy is the product of a forty-year-old consensus manufactured to cover up a theoretical schism between squabbling Keynesian and monetarist sects. By inducing misplaced confidence in structural reform as the only long-term cure for unemployment, it continues to prevent a solution to the crisis. The legacy of toxic economic theory is the bankruptcy of economic policy. The accounting system (burdened by unhelpful and occasionally fraudulent standards) is hardly 'fit for purpose'; it is not reliable for assessing or comparing corporate performance and has become an almost overpowering incentive to 'short-termism'. The tax system has evolved (through a series of historical accidents) into a dysfunctional 'non-system' that obstructs the goals of economic policy. Single-gear macroeconomic policy, having failed to deliver full employment without inflation, now offers little more than a choice of evils: either single-gear 'austerity' - which jeopardises growth; or else single-gear 'growth' - which risks fuelling inflation. A Multi-Gear Strategy for Economic Recovery is outlined in the companion volume Front Matter....Pages i-xvi Front Matter....Pages 1-1 The Greatest Pyramid Scheme since the Time of the Pharaohs?....Pages 3-8 From Economic Miracle to Credit Crunch: Thirty Years of Self-Delusion....Pages 9-19 Front Matter....Pages 21-24 A Mediaeval System of Accounting....Pages 25-36 Fair-Value Accounting and Balance-Sheet Myopia....Pages 37-46 The Market-Value Delusion and the Credit Crunch....Pages 47-59 Front Matter....Pages 61-64 The Topsy-Turvy Wonderland of Single-Gear Economics....Pages 65-75 Traffique: The Praeheminent Studie of Princes....Pages 76-83 Capitalism and Socialism: The Fatal Conceit....Pages 84-92 A Genuine Free-Market Alternative....Pages 93-98 Front Matter....Pages 99-101 Income Tax: A Two-Hundred-Year-Old Myth....Pages 103-107 The Assessed Taxes....Pages 108-115 Not So Much a Tax, More an Anti-Avoidance Provision....Pages 116-125 The Growth of the Monster....Pages 126-135 Front Matter....Pages 137-140 Economic Efficiency or Social Justice?....Pages 141-148 Taxation and “The Law of the Market”....Pages 149-159 Pay As You Spend....Pages 160-171 Pay As You Spend: The Social Justification....Pages 172-180 Pay As You Spend: The Economic Justification....Pages 181-191 Front Matter....Pages 193-195 Toxic Economic Theory and Global Recession....Pages 197-203 Back Matter....Pages 205-253