Seven Bad Ideas by Jeff Madrick

Comprehensive. Explains 7 of the biggest ideas underlying the dominant economic model of the world, then demolishes them. One by one, each is shown to be based on false assumptions and a complete lack of evidence.

Ties everything together by showing how policy shaped by these ideas has damaged the world economy.

Three of the many things I learned:

  • The modern concept of using defense contracts to spur industrial innovation was invented in the US, in the 1800s.
  • For Adam Smith, prosperity came from increased productivity (usually from a better division of labor), not from the Invisible Hand, which was a guide to where to invest, not the engine of growth itself.
  • Multiple Acts of Congress (notably the Humphrey-Hawkins Act of 1978) direct the Federal Reserve system to pursue policies of full employment and low inflation. For the past thirty years, the employment mandate has been ignored.