The Terrible Simplifers: Common Origins of Financial Crises and Persistent Poverty in Economic Theory and the new ‘1848 Moment’

Erik Reinert ()

Working Papers from United Nations, Department of Economics and Social Affairs

Abstract: One element explaining the financial crisis is what Hyman Minsky called ‘destabilizing stability’: long periods of stability lead to increasing vulnerability. This paper argues that similar mechanisms are at work inside economics: long periods of economic progress in the core countries lead to increasingly abstract and irrelevant economic theories (‘terrible simplifications’). This leads to turning points towards more relevant economic theories, referred to as ‘1848 moments’. The paper further outlines the key variables that need to be re-introduced into economic theory in order to furnish poor countries with the type of productive structures that makes it possible to eliminate poverty.

Keywords: Uneven economic development; production-based economics; technological change; innovations; increasing returns; synergies (search for similar items in EconPapers)
JEL-codes: A11 B10 F10 O57 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2009-12
New Economics Papers: this item is included in nep-hpe and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:une:wpaper:88

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