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Money, Blood and Revolution: How Darwin and…

Money, Blood and Revolution: How Darwin and the doctor of King Charles I…

by George Cooper

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As economies have stagnated since the crash of 2008, economists have bickered over diagnoses and prescriptions. This council of confusion has dented economics’ claim to be a wertfrei science; after all, astronomers no longer argue over whether the earth orbits the sun, that argument was settled in favour of the heliocentric model centuries ago. Current economic debates, by contrast, seem little advanced from [a:Keynes|159357|John Maynard Keynes|https://d.gr-assets.com/authors/1244623131p2/159357.jpg] and [a:Hayek|670307|Friedrich Hayek|https://d.gr-assets.com/authors/1396194085p2/670307.jpg] in the 1930s, or the argument over gluts between [a:Malthus|493407|Thomas Robert Malthus|https://d.gr-assets.com/authors/1244625235p2/493407.jpg] on the one hand, and [a:Ricardo|15863|David Ricardo|https://d.gr-assets.com/authors/1244625374p2/15863.jpg] and [a:Say|700371|Jean-Baptiste Say|https://d.gr-assets.com/authors/1244625767p2/700371.jpg] on the other, a century before that.

According to fund manager [a:George Cooper|7867037|George Cooper|https://d.gr-assets.com/authors/1392800077p2/7867037.jpg] in his new book Money, Blood and Revolution, this is a result of economics being in the ‘crisis’ period of a Kuhnian scientific revolution. The past few years have confronted the dominant ‘neoclassical’ paradigm with a series of observations it is increasingly unable to accommodate, and the search is on for the new paradigm.

There is nothing new in applying [a:Kuhn's|4735497|Thomas S. Kuhn|https://d.gr-assets.com/authors/1341864336p2/4735497.jpg] apparatus to economics. It is a fruitful approach; Peter Hall used it to investigate the shift in British economic policymaking from Keynesianism to monetarism, and [a:Murray Rothbard|46810|Murray N. Rothbard|https://d.gr-assets.com/authors/1215371480p2/46810.jpg] used it to explore the history of economics more generally.

But it is not clear how much of this confusion rests with Cooper himself rather than the discipline of economics. In his review of the contending schools Cooper admits that he cannot but give his ‘own personal definitions’ of each school and acknowledges that ‘almost every reader will disagree with some elements of how I have characterised, or perhaps caricatured, each school’ (p. 83). True, but Cooper says that the Austrian School ‘makes no effort to integrate government into its core paradigm’ (p. 91). This of a school one of whose founders produced works titled [b:Nation, State, and Economy|264472|Nation, State, and Economy|Ludwig von Mises|https://d.gr-assets.com/books/1328775333s/264472.jpg|148873], [b:Critique of Interventionism|1721363|Critique of Interventionism|Ludwig von Mises|https://d.gr-assets.com/books/1265813321s/1721363.jpg|1718741], [b:Omnipotent Government|2714639|Omnipotent Government|Ludwig von Mises|https://d.gr-assets.com/books/1382940799s/2714639.jpg|2696881], and [b:Bureaucracy|154409|Bureaucracy|Ludwig von Mises|https://d.gr-assets.com/books/1211837784s/154409.jpg|731526], and one of whose great expositions is titled [b:Man, Economy, and State|154255|Man, Economy, and State|Murray N. Rothbard|https://d.gr-assets.com/books/1387740653s/154255.jpg|148879]. Saying that the Austrian School ‘makes no effort to integrate government into its core paradigm’ is not a characterisation or caricature; it is wrong. Cooper might be unaware of these efforts, but that does not mean they have not been made.

Other schools fare little better. [a:Adam Smith's|14424|Adam Smith|https://d.gr-assets.com/authors/1244624882p2/14424.jpg] famous observation that ‘People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices’ is presented as the same thing as Marxism’s belief in capitalism’s ‘tendency towards monopoly’. This is logically wrong; if there is a monopoly there aren’t different people of the same trade to meet and conspire; conversely, if there are people of the same trade to conspire there isn’t a monopoly.

Out of this confusion Cooper conjures the statement that ‘capitalism does suffer an inherent tendency toward monopoly and wealth polarisation’ (p. 109). In 1900 the 12 largest US corporations were American Cotton Oil, American Steel, American Sugar Refining, Continental Tobacco, Federal Steel, General Electric, National Lead, Pacific Mail, People’s Gas, Tennessee Coal & Iron, US Leather, and US Rubber. Now consider that 98 years later just one of these corporations was still among the US top 12, namely General Electric, accompanied by General Motors,Walmart, Exxon, Ford, IBM, Citigroup, AT&T, Philip Morris, Boeing, Bank America, and SBC Communications. The giants of 1900 were swept aside, not by antitrust law but by the ‘creative destruction’ of the capitalist system. (Cooper erroneously applies [a:Schumpeter's|77916|Joseph Alois Schumpeter|https://d.gr-assets.com/authors/1359367385p2/77916.jpg] famous description of the entrepreneurial process to the liquidation phase in an Austrian business cycle.)

The point on wealth polarisation demonstrates a myopia common in economic policy debate.While income inequality might have risen in recent decades within rich countries, globally, according to recent research from the World Bank’s Christoph Lakner and Branko Milanovic from the Luxembourg Income Study Center, inequality has fallen.

Cooper is little more persuasive when he unveils his proposed new paradigm, supposedly derived from the work of William Harvey, physician to Charles I who first accurately described the circulatory system. There is, again, nothing new in taking economic inspiration from other sciences; Adam Smith and [a:William Stanley Jevons|185520|William Stanley Jevons|https://d.gr-assets.com/authors/1244626265p2/185520.jpg] both consciously aped the aims and techniques of contemporary physics, and [a:Alfred Marshall|368788|Alfred Marshall|https://d.gr-assets.com/authors/1444912194p2/368788.jpg] made frequent reference to techniques of biology in his [b:Principles|746128|Principles of Economics|Alfred Marshall|https://d.gr-assets.com/books/1365463941s/746128.jpg|2910205], citing Darwin specifically. More recently, behavioural economists have adopted the tools of psychology.

Cooper’s model is a pyramid with poor at the bottom and rich at the top, and government, somewhere outside, taking money from the rich and giving it to the poor. The neoclassical paradigm, which utilises monetary policy and increased debt to manage economies, has allegedly failed because that debt is typically taken on by poorer households, and the repayments flow up to the rich. This has reached saturation point and widened inequality, Cooper argues. Recent attempts to repeat this manoeuvre have seen central banks stuff the commercial banks (which in Cooper’s model are simply the pockets of the rich) with cash, which they have held on to. Much more effective as stimulus, Cooper suggests, would be to hand the money to the poor, who will spend it.

But again, there is nothing new here; it is simply Keynes’s notion of differing marginal propensities to consume in a relabelled circular flow model. Neither is there any discussion of the reason the banks might have sat on their cash infusion, such as a desire, quite reasonable given recent events, to hold greater reserves against their assets.

Fresh ways of looking at economics are to be welcomed, as Cooper rightly says, now more than ever. But this book is not introducing new insights from fresh perspectives; it is simply serving up standard, textbook Keynesianism arrived at via a more circuitous path than usual. That might be perfectly fine, but the case for Keynesian policies has been made better and more economically elsewhere. This book charts not so much an untrodden path to a new paradigm, but a well-worn scenic route back to an old one.
( )
  JohnPhelan | Oct 4, 2016 |
A good book, which explores some interesting ideas. It gives a nice summary of Thomas Khum's ideas about how science makes progress, and gives a nice synopsis of the key schools of thought in economics, namely keynsianism, neoclassical, libertarianism, marxism, etc. The author also, presents some very interesting ideas about a different way to think about economics, with the individual actors being competitors rather than maximisers. Worth revisiting at some point. ( )
  jvgravy | Mar 20, 2014 |
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Amazon.com Product Description (ISBN 0857193821, Hardcover)

Economics is a broken science, living in a kind of Alice in Wonderland state believing in multiple, inconsistent, things at the same time. Prior to the financial crisis, mainstream economics argued simultaneously for small government on taxation, regulation and spending, but big government on monetary policy. After the financial crisis, economics is now arguing for more government spending and for less government spending. The premise of this book is that the internal inconsistencies between economic theories - the apparently unresolvable debates between leading economists and the incoherent policies of our governments - are symptomatic of economics being in a crisis. Specifically, in a scientific crisis. The good news is that, thanks to the work of scientist and philosopher Thomas Kuhn, we know what needs to be done to fix a scientific crisis. Moreover, there are two scientists in particular whose ideas could show how to do this for economics: Charles Darwin, the man who discovered evolution, and William Harvey, doctor to King Charles I and the first man to understand blood flow and the workings of the human heart. In Money, Blood and Revolution, bestselling financial writer George Cooper explains how the ideas of Darwin and Harvey could revolutionise economics, making it more scientific and understandable, and might even reveal the true origin of economic growth and inequality. Taking readers on a gripping tour of scientific revolution, social upheaval and the secrets of money and debt, this is an unmissable read for anyone curious to understand how the world really works - and the amazing future of economics.

(retrieved from Amazon Thu, 12 Mar 2015 18:12:45 -0400)

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