What about all this "too big to fail" bs? Capitalist theory does not model how todays multinationals work nor the amount of power they have. Economic theory is predicated on numerous small firms with full information and small entry costs. Now how is that anything like todays world?

Pseudoscience is not the word for it. Religion would be more likely. Or just straight up dishonest, designed to encourage and facilitate the exploitation and domination of the weak and powerless by the wealthy and unscrupulous.

fatfingers is spot on.

There's no sensible alternative to free markets. In fact our present situation in a result of not having a free market. We instead have some debauched type of crony capitalism that benefit the financial elite. This elite class throws scraps to the entitlement class whilst squeezing the middle class.

Thus we have three types of people:

- the financial and ruling elite
- the productive middle class
- the entitlement class

The flaw in democracy occurs when the majority realize that they can vote for the public purse. This is driven by left wing thinkers and right wing Ponzi schemers who are actually one and the same. Unfortunately most people spend their time/energy in pointless left/right wing debates and totally miss the obvious. In the end and as evolution dictates wars decide which ideas survive and in time the cycle will repeat for basically everything that is new is old. Stated another way not much happens that has not happened before - history is your friend.

I can't believe folks are still supporting the neo-lib ideas even when they have clearly crashed and burned.
Fact is, even the pure theory is against them.
The Utility in an economy is maximised when profits are minimised. This is a mathematical identity because excess profits are a form of taxation on the flow of monies and goods.
The so called "good decade" of Howard was *not* good for the economy as a whole. We have stripped our country of manufacturing, crippled our farming areas (Melbourne is even stealing water from one of the countries food baskets: more food imports form Asia!)
The Neo-Lib approach has been shown to be what it is: Pure selfish greed. Private profit, public liability is the motto.
To the knockers of the article: there are well tried and tested alternatives that are currently working in developed countries nearby. We can learn a lot from Malasia, Singapore and even more from Denmark.
If the so-called economic managers cannot see how a farm is run and scale it up (with a good dose of history as a BS detector) like our fore-fathers did then they don't deserve the job.
Our economy is beset by limitations imposed by greed. I wonder just how bad it has to get before we get "governance" again. I suspect we need a new political party that is not special interest.

The free market is belief rather than reality. Adam Smith, the great economist, wrote the Wealth of Nations (WON) which developed basic market theory. In there is much wisdom containing the failings of the market and the necessity for government regulation.

WON about capitalist conspiracies:

“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. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies, much less to render them necessary.”

WON about excessive profits and complaining about paying wages:

Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.

WON on capitalist propaganda:

They [general public] have commonly neither inclination nor fitness to enter into combinations; and the clamour and sophistry of merchants and manufacturers easily persuade them that the private interest of a part, and of a subordinate part of the society, is the general interest of the whole.

All posts seem to be arguing as if money was a commodity. Your talk of money markets is an absurdity because money is a system not a commodity. So illusionary markets are created buying and selling something that doesn't exist and wonder why playing with the money systems stuffs things up.

Wealth comes from one source only; activity in the real economy. Neo-liberalism has not created wealth. It has only transferred wealth from one place to another to the benefit of a few and the great loss of many. Wealth, true wealth remains where it has always been, in the real economy.

If the aim of neo-liberalism is to transfer wealth from the many to the few then it has been a great success.

In the crisis that exists in the world today nothing has changed much in the real economy. Real assets, reserves and potentials have changed very little in the last 12 months. So why has it all fallen in a hole? It is because the money people have just conducted the latest rape of the real economy that has left it battered bruised and traumatised.

The system is very simple. The real economy recovers and builds up to the benefit of the many. In come the money people who rape the real economy and send it back into the gutter.
Next just sit back until the real economy pulls itself out of the gutter and then rape it again.

There is only one way to end this cycle. Understand that money is only a system that exists for the good of the real economy. Then design a system that exists only for the good of the real economy. Finally make it bullet proof against the rapists who know only greed.

For neo-liberalism read greed, greed, greed, and more greed.

Davly, spot on. There will be a new site coming on line within the next couple of weeks:
stableproductivemoney.wordpress.com. Keep an eye out for it.

Fatfingers, I've read quite a lot of mainstream economics. I know about the so-called counter-arguments you raise. As a scientist I'm not impressed. You have not read my arguments in any detail, yet you dismiss them and call me names. I have cited specific evidence, you have made only vague allusions to "gargantuan" amounts of evidence. When I mention sophisticated mathematics, I'm not referring to econometrics, I'm referring to a large body of neoclassical theory based on patently absurd assumptions. It is possible to do real science on complicated systems. My day job is the inside of the Earth, about which our knowledge is quite incomplete. The key is to keep a clear view of what you DON'T know. On social systems, that are much more complicated than the Earth, complexity economics is building a scientific approach. Living systems do have a typical "character", even though their detailed behaviour can't be predicted minute-by-minute. That permits a scientific, if necessarily humble, approach to understanding.

Most critics here just keep repeating that unfettered markets are best. I agree our present system is manipulated, although it HAS been privatised and deregulated a lot over the past three decades. But I'm saying something more basic: the theoretical basis for the central claim about free markets is nonsense, at least for large modern markets, as distinct from a village produce market. Most of the critics here haven't engaged with that central point. At least fatfingers has had a go.