This is my review of Ormerod when it was published:
The Death of Economics, Paul Ormerod, Faber and Faber, £6.99 pbk
As a one-time economic forecaster, Paul Ormerod has written an exposé of economics as it is practised that is readable and funny. His thesis is compelling: economics does not work. He shows how the models of economic behaviour used by academic economics are so divorced from reality as to be useless as a guide to the economy. In particular Ormerod shows the absurd assumptions made by mathematical models of the economy that seek to demonstrate that there is a general equilibrium at which all commodities get sold. To reach an equilibrium, economic models must 'assume a continuum of traders' which means that the number of people trading is infinite; that there is no passage of time; and that everyone knows the prices of all the commodities.
On top of the sheer implausibility of academic economic models, Ormerod recounts that the models of real economies used by forecasters are unreliable. The single most reliable method of predicting economic figures, he says, is to reproduce last year's figures.
But good as Ormerod's exposure of economic orthodoxy is, his main purpose is to elevate the idea that nothing can be understood all that well because we cannot know the effects of our decisions. On the one hand he is scathing of the free market orthodoxy for its failure to take into account social factors - by which he means environmental damage or the negative impact of poverty and unemployment. On the other hand he implicitly rejects the idea that the economy can be planned, because he assumes that it cannot really be understood.
Of course it is fair enough to make the point that a capitalist economy is in its nature spontaneous and irrational. But the conclusion that its operation cannot truly be understood is illegitimate. That only makes a virtue out of the problem and ends up ruling a rational social order out from the beginning. Ormerod is a critic of the orthodox apologetics of the theory of general equilibrium, but his own chaos theory of the economy is just as great a mystification.
James Heartfield
Reproduced from Living Marxism issue 78, April 1995