Economics and politics - comment and analysis


This website presents theoretical and empirical work by Heiner Flassbeck, Friederike Spiecker and other researchers who are involved in providing economics with a more realistic basis. There are many schools in the science of economics, and approaches and traditions differ widely and are often irreconcilable. On the one hand, there is the prevailing paradigm which is based on the so-called universal model. In this model, the household is the representative unit of economic decision-making. It is conceptualised as a perfectly rational actor that decides on spending and saving. The universal model conflicts with more moderate models in which the rationality of actors is somewhat limited, although, basically, the same rules still apply. In addition, many other economists criticise mainstream neoclassical economics, the ruling doctrine within current economics, on several grounds. Neoclassical economics disregards a lot of real-world phenomena because it does not consider them to be ‘economic’ in nature, it postulates and assumes rationality of economic actors and has little interest in a wide range of subjects and problems, such as power relations.

However, although many objections to mainstream economics can be made (and have forcefully been made in the literature), we ultimately consider this type of polarisation unfruitful and choose to concentrate upon the macroeconomic dimensions of basic economic understanding instead. The study of macroeconomics is essential to obtain a full understanding of economics and its social consequences. Hence, macroeconomics is essential if one wants to propose economic policies that can work in the real world. This site presents our work in this area. Macroeconomic theory is used in a logical way to reach relevant and implementable policy proposals. The mainstream opposes this pragmatic approach, mainly for ideological reasons (no concessions will be made to the ‘Keynesians’!), but their opposition does not help their cause: time and time again – and in ever shorter time intervals –  they are pushed back into a position in which they have to defend the indefensible. Their problem is that reality works differently from the way in which neoclassical economics conceptualises it. However, some of the critique of neoclassical rationality, although it is perfectly correct and pertinent in itself, does not constitute a fundamental gain: as long as economics holds on to the basic premises of neoclassical economies and satisfies itself with criticising its macroeconomic paradoxes and blindness to social outcomes, no new light will shine in economic science. As a result, absolutely crucial dimensions remain hidden.

You are free to call the orientation that is being proposed here as ‘Keynesian.’ But this categorisation is incomplete if only cash-based mechanisms, the multiplier or the widespread yet in many respects misleading IS-LM (Hicks-Hansen) model are meant. We conceive of economics as an open system and we try to integrate everything that can be confirmed empirically and that is macroeconomically relevant. This leads to a completely different version of macroeconomic logic than can be found in traditional Keynesianism. The main concern is the labour market, in tandem with the competitiveness of economies and competition in general. The most important issue – and our core concern – is how in temporally and spatially open economies (in times of saving policies from different economic actors) dynamic investment that drives economic progress, income growth and employment takes place. To this day, despite theoretical work that points in the right direction, there is no real satisfactory answer to the question how this works exactly.