How Economic Theory Came to Ignore the Role of Debt

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* Article: How economic theory came to ignore the role of debt. Michael Hudson (University of Missouri at Kansas City, USA). Paecon, 2011.

URL = http://www.paecon.net/PAEReview/issue57/Hudson57.pdf comments

Amazing history of how the problem and issue of debt has been systematically ignored since Ricardo.


Description

"Starting from David Ricardo in 1817, the historian of economic thought searches in vain through the theorizing of financial-sector spokesmen for an acknowledgement of how debt charges (1) add a non-production cost to prices, (2) deflate markets of purchasing power that otherwise would be spent on goods and services, (3) discourage capital investment and employment to supply these markets, and hence (4) put downward pressure on wages.

What needs to be explained is why government, academia, industry and labor have not taken the lead in analyzing these problems. Why have the corrosive dynamics of debt been all but ignored?"


Source

Michael Hudson, “How economic theory came to ignore the role of debt”, real-world economics review, issue no. 57, 6 September 2011, pp. 2-24, http://www.paecon.net/PAEReview/issue57/Hudson57.pdf

You may post and read comments on this paper at http://rwer.wordpress.com/2011/09/06/rwer-issue-57-michael-hudson/