A far more fundamental revolution in economic thought is needed than the new theory of capitalism that Paul Mason calls for (To move beyond boom and bust, we need a new theory of capitalism, G2, 23 March). Ever since Adam Smith, economics has been pursued as a science, as a discipline that seeks to improve knowledge about economic phenomena. But at the heart of the enterprise there is a problem of living, having to do with the creation and distribution of wealth – or, better, the sustainable creation and just distribution of wealth. Granted that the task of economics is to improve our attempts at solving this basic, real-life problem, economics needs to give intellectual priority not to theory or the pursuit of knowledge but to (a) getting clearer what our economic problems are, and (b) proposing and critically assessing policies designed to help solve them. Economics ought not to be thought of as a science at all. Rather, its proper, fundamental task is to invent and critically assess policies from the standpoint of their capacity, if implemented, to help solve our real-life economic problems.
Emeritus reader, University College London
• Paul Mason is right to want a fundamental reform of economics, and not just to incorporate behavioural economics “so that bankers can construct trading models to iron out problems created by the way our brains work”. He favours the Minsky theory that financially complex capitalism is inherently unstable because debt tends to rise exponentially until the next crash. But capitalism has had a good run for at least a century, while the Minsky view has only begun to look plausible since 1970s deregulation. This might suggest that a bit more regulation would put things back on track.Continue reading...