Recommended: Economyths

If there is one thing that is painfully obvious these days, it is that the grand economic models that have won some economists fame, fortune, and even Nobel Prizes, are shams. All those fancy models didn't accurately model the risks in the derivatives market. All those fancy models didn't forecast the current global financial crisis. The stimulus steps those models predicted would stem the recession and limit unemployment well below 8% have failed, and failed miserably. Economists are quick to explain away these failings in all sorts of ways, but the test of a scientific principle is that it works, and their models clearly don't work.

Of course there have been people telling us all along that the emperor had no clothes, among them Nassim Taleb (author of The White Swan), Warren Buffet (the immensely successful investment manager) and economist Nouriel Roubini (known as "Dr Doom" before his predictions of imminent market failure all turned out to be highly accurate). But the academic economists and their highly-paid brethren in the financial industry ignored these voices, naively content that their elaborate models accurately modeled the world.

Oxford mathematician David Orrell argues in his book Economyths: Ten Ways That Economics Gets it Wrong (2010) that the fundamental assumptions underlying current economic dogma (or ideology, as he terms it) are false, and explores the roots of these myths in the history of civilization. This is a serious book, despite being only a 250 page paperback (proof that size, cost, and abstruseness of an economics book is no reliable indicator of its worth). This book is well worth reading, and a good follow-on to my previous recommendation, Economics Without Illusions.