Macroeconomics Fifth Edition

I rented the e-textbook for an MBA course I am taking. We were assigned exercises from the end of each chapter as part of our homework grade. Not all of the question numbers in the e-book align with the same question number in the physical textbook.

This is a modern book about macroeconomics, perfect.

Although impressive in its coverage and detail, Charles Jones’s ‘Macroeconomics’ exemplifies everything that is wrong with contemporary economic theory and policy. Jones uncritically propounds the neo-classical view in which the economy is a finely tuned instrument responding and adjusting to price signals. This enables him to build an elaborate elegant mathematical model which can then be ‘solved’ to determine the economy, simulate responses, and inform policy. The problem is that the mathematical model is a myth, failing to represent how the real economy actually works.Although Keynes gets 3 fleeting references (compared to 13 for Friedman), there is zero mention of the Keynesian revolution, in which the economy is a plumbing system which can get stuck in blockages, instead of the neo-classical finely tuned instrument which always adjusts to equilibrium. According to Jones, the labour market adjusts its supply and demand according to its price, ie the wage, against the marginal productivity of labour. Investment responds to its price, ie the interest rate, against the marginal productivity of capital, and is led and funded by savings. It’s all the supply and demand tautology which explains nothing.But, as Keynes so convincingly pointed out, wage is also the enabler of effective demand, which boosts expected consumption, which is the real determinant of business investment, rather than either the interest rate or savings. Increased wages can therefore increase, rather than decrease, employment.Jones claims that central banks create money, whereas central banks themselves explain that it’s commercial banks which create money for business and individual loans, and earn its seigniorage. Central banks are in fact explicitly proscribed from direct money creation to fund government expenditure, a proscription they commonly overcome by (scandalously) purchasing their own government’s debt in secondary markets. He wrongly assumes that money is necessarily debt at the point of its creation, and thus follows the error of orthodox accountancy, masquerading as economics, in viewing debt/GDP ratios as a real constraint. He makes no mention, and therefore offers no critique, of modern monetary theory. He claims that the labour share of GDP is constant, whereas in fact, it’s declining. He therefore misses important arguments for an increased proportion of non-labour income, whether as pensions, welfare benefits, dividends, or household debt. He makes no mention of huge dysfunctionalities in contemporary economies, ranging from gross inequality, through in-work poverty, low wage, bullshit jobs, austerity, and ecological damage. His macroeconomics is disengaged theory. His belief in the efficacy of the interest rate to control the economy and the Taylor rule to control inflation is delusional.Most importantly, Jones fails to include technology in his economic theory. Both in its constant creation of new and better products and services, and in its equally constant evolution of production functions to higher levels of productivity, it is technology working through effective industrial management which determines and transforms economies. Jones is not alone in this omission - it is a core failure of mainstream economics.It's therefore between surprising and shocking that Jones’s book is the set text for economics undergraduates at Cambridge university UK, which is the seat of Keynesian theory.