Maintaining ignorance about the limitations of stability theory comes in handy when perpetuating the mythology of market theory. As Mundell once remarked, stability analysis is the most successful failure of general economic theory. It is also the best example of how an academic community pushes the most serious problems of mainstream theory under the rug and gets away with it. Students should learn to look under the rug. The ability to improve our understanding of economic processes depends on efforts to uncover the failures of mainstream theoretical constructs.
Read also: Rethinking Macroeconomics for Sustainability
The world is caught in the deepest financial and economic crisis since the Great Depression. The economic crisis is not the result of what could be called a rare probability event (“a perfect storm”), but rather the unavoidable outcome of an economic paradigm that dominated policy-making since the early eighties, one that has come to view the natural resource base as simply another asset to be exploited. At the same time, we are trapped in a vicious environmental predicament. We are not only threatened by stagnation, deflation, unemployment and poverty. Our world is also menaced by climate change, deforestation, soil erosion, polluted aquifers and a man-made event of mass extinction.Rethinking Macroeconomics of Sustainability explores the relationship between macroeconomic policies and environmental sustainability, arguing that monetary and fiscal policies are as important for environmental stewardship as they are for growth and prosperity — something that has not been adequately recognized thus far.