Chapter 4: The Mythical Machine

1. Economics, the study of how one particular species manages to survive in the world, would seem to have an inherently close connection to biology. But economists have never borrowed concepts from biology. As a result, today's economics remain wedded to the classical Newtonian paradigm.

2. If economics were just a branch of philosophy, its mechanistic outlook would not matter, but basic ideas about how the economy works directly affect the lives of millions.

3. Unaware of the historical roots of the East vs. West ideological conflict, many people assume the animosity between Left and Right, socialist and capitalist, has always existed.

4. Logically, economists have had three ways to deal with Malthus' population principle:
   • They could propose ways to alleviate its cruel consequences;

   • They could ignore the inevitable tragedy and hope it would go away;

     or

   • They could show the principle was wrong -- that production increases could outpace population growth. This has never been pursued.

5. Karl Marx was the first person to propose any theory of how economies change over the course of history. His theory was built on the concept of change.

6. In Marx's theory of class conflict, changes in "productive relations" (technology) lead to economic changes between classes of people, which, in turn, lead to class conflict and political restructuring.

7. Marx's conception of how the economy changed throughout history has served as the theoretical underpinning of every socialist society. Western capitalist economics never developed a coherent theory of change comparable to Marxism.

8. Western economics have focused on the near term, how things work now. John Stuart Mill believed that the distribution of output among individuals was governed by changeable laws and social customs, while the actual physical processes of production obeyed the unalterable "law of diminishing returns."

9. Beginning in the 1870s, "marginalists" relied on the idea of "decreasing marginal returns" as the building block of modern equilibrium, or neoclassical, economics.

10. Both Marxism and Western economics were established before Darwin. To date, neither side has ever seriously considered evolutionary biology as a metaphorical paradigm. Consequently, neither side has yet resolved the central dilemma of how the economy changes.