The Great Financial Crisis has been a disaster for the economy (we're now entering the sequel Double Dip: Just When You Thought It Was Safe), but a boon for economists. Zombie Economics by John Quiggin is the latest in the post-crisis genre. It's a clever idea, summed up in the subtitle 'How dead ideas still walk amongst us'. The book tackles the idea of the Great Moderation; the efficient markets hypothesis; dynamic stochastic general equilibrium (DGSE); trickle-down economics; and privatization. Quiggin's argument in each case is that the idea has been torpedoed by events and yet nevertheless continues to have adherents amongst both economists and policymakers.

I think his verdict is right in some of these cases, and interestingly wrong in others. Even where I disagree with him, however, the book sets out a very clear and concise analysis of the debate. This makes at an extremely useful guide to debates in macroeconomics in recent decades, to the intellectual roots of even such bizarre practices as the use of DGSE models.

For this is one area in which I wholeheartedly agree with Quiggins. There were two years in the mid-1980s when I was a macroeconomic forecaster, using a traditional mish-mash macro model, and that was weird enough, and then I lost track until noticing as the crisis unfolded that macroeconomists seemed to take DGSE models seriously as a guide to reality. It's a little disappointing that Quiggins didn't say more about the interesting work on macro phenomena as emergent phenomena of complex systems (Paul Ormerod's Butterfly Economics is still the best accessible guide). Still, this chapter is excellent on the history of modern empirical macro from the old monetarist vs Keynesian's debate through real business cycle theory on.

In the chapters on the efficient markets hypothesis and privatization, Quiggins makes lots of excellent points about the way the Robespierre/St Just tendency amongst economists took good ideas to excess. For me, though, his clear political preferences mean he does tend to attack the caricature versions. I think it's debatable how far those extreme versions continued to hold sway intellectually. For example, continuing privatization has had more to do with the political expediency of getting around public finance constraints. What's more, the economics of public service reform seem to me to suggest that even if wholesale privatization is flawed, ensuring choice and elements of competition in public services does deliver good results for users and taxpayers. This chapter of Zombie Economics reads to me as though its author would rather just turn the clock back. He argues for public ownership of infrastructure and public provision of health and education. This, though, is to stay in the rut of “market vs state” thinking against which Elinor Ostrom, amongst others, has argued so eloquently.

My other main substantive criticism is that Quiggins dismisses the Great Moderation, the decade and a half of low inflation and stable growth in the OECD economies, entirely as an artefact of flawed policies: essentially he argues that the 'Greenspan put' of always loosening monetary policy to prop up financial markets, created the boom, shovelling liquidity into places that didn't really deserve it. Quiggins argues that the Golden Age of the 50s and 60s was obviously more stable, and if the volatility figures show otherwise then they're measuring the wrong thing. Well, standard deviations of GDP growth and inflation measure what they measure. Looking at employment rates and median incomes in the 60s vesus the 2000s would obviously tell a different story, and one Quiggins cares about more. Although there was clearly a strong role for policy in creating the long boom of the mid 1990s to 2007, the impact of new technologies and the deregulation which together enabled the global reshaping of supply chains and just-in-time logistics. These were real, structural changes in the economy. It seems likely that they imply two kinds of business cycle 'regime' – more stable than old cycles during stable eras, but then more volatile in between. Anyway, the time series dynamics do look genuinely different since the mid-1990s.

I hope this doesn't put anyone off reading the book. It's an excellent canter through some key areas of economics, and as Quiggins wears his views on his sleeve, it's easy to spot those sections of the text.

Besides, it's well worth it for the cover alone!