Economics, as it is now taught, is almost total rubbish. No wonder the world is in a mess when political decisions are based on this nonsense.

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A number of years ago, I came up with an acronym. The acronym was CRAp, and it stands for Completely Rubbish Approximations to the truth. And economics is, using that acronym, completely crap.

I'm sorry to tell you that, because every day people talk to you about economics on the radio, on the television, in any news media you look at, on social media, and most of what they're talking 📍 is also total crap.

And there's good reason for me saying this. The vast majority of economics as taught today, as believed by politicians and economists today, and as repeated in the media, is rubbish because it's all based upon false assumptions, which are profoundly harmful, and I think I've got a duty to tell you that.

Fundamentally, the economics that we are taught, and which is used to justify the idea that markets are the best way to allocate resources in our society 📍 is based upon a series of falsehoods.

The biggest of those falsehoods is that the world is certain.

We know everything.

We don't change our minds.

We are able to tell the future, and there is no doubt about what will happen.

At this moment, if we go into the marketplace, whatever the marketplace might be, we can obtain information on all the products and services that are available to us and the prices, and match those against our needs and come up with an optimal outcome. And I can assure you, this assumption, which economists have to make so that their maths works, is total and utter rubbish.

You know that. I know that. Everybody on Earth knows that, but despite that, economists build their economic models on the basis of this fantasy.

Unsurprisingly, those models don't work, and we end up with a crap economy built on the basis of this crap assumption, which is in turn fueling crap politics, which believes that this is true, and the outcome is total crap.

In other words, we have something which only vaguely approximates to something useful when we know we could have something better.

And we've known that we could have something better for a very long time. The idea that there is uncertainty in the world has existed for over a century now. Its greatest early proponent was probably Lord Keynes, John Maynard Keynes as he was for most of his life, who was, in my opinion, the greatest economist of the 20th century. And he wrote about this in the 1920s based upon the work of some others, I should say, who came shortly before him. But what he pointed out was that the world is uncertain.

And the difference between a certain world, and an uncertain world, is absolutely enormous.

In a certain world, you know what all the outcomes to a decision that you might make are.

In other words, if you go out tonight, you know the full range of possibilities of the things that might happen. Do you? Have you ever? Of course you haven't. You simply cannot predict everything on something as simple as what might happen if you go out tonight. There is uncertainty; things that we simply don't know. The unknown unknowns that Donald Rumsfeld 📍 once talked about. And those uncertainties cannot have a mathematical probability attached to them because we simply don't know whether they exist, or whether they might happen. And so what that means is that all our economics is wrong because it excludes the possibility that the unknown might actually occur.

It also doesn't allow for the fact that we are irrational, we're inconsistent, and that we actually do not behave as what an economist will call, slightly jokingly, homo economicus, the rational human being who doesn't, of course, exist.

Once you can decide that something like the human being is something other than they actually are - rational when they aren't - you can make lots of other absurd assumptions as well.

For example, you can assume that the state is a constraint on human behavior and shouldn't really be allowed to undertake any activity because everything it does is harmful to our well-being because it stops us making rational choices.

But the fact is that we don't make rational choices, and we might make some extremely bad choices based upon the information that we have, which the state can compensate for. Therefore, having a state is actually a good thing, even though neoliberal economics tells us it isn't. And every single mainstream political party in the UK, and I stress mainstream, believes that as a result, the size of government should be shrunk. That assumption is wrong, because the basis on which that conclusion is reached, is wrong.

And there are other quite absurd examples inside macroeconomics of things that are assumed but which actually aren't true.

For example, macroeconomics takes no consideration of the existence of companies.

It doesn't assume that they exist, or have power, or influence our behaviour. It assumes that this singular person, homo economicus, this rational human being, is the entity that drives the economy when clearly it doesn't. So we have, again, an economic model that is not based in any shape or form on reality, either about government, or about the way in 📍 which markets 📍 work .

There is therefore a profound theoretical blind spot inside economics, and the result is, well, quite staggeringly important. For example, the whole of the economics of austerity was based upon the false models I've just 📍 explained. It presumed that there would be certain forms of behavior if the government tried to shrink the size of the state, which were quite contrary to what actually happened.

And again, inflation theory is totally wrong because it assumes, in the way that the Bank of England pursue it, that unemployment and inequality don't matter. And yet there's ample evidence from talking to real people and asking them what their priorities are, that they are much more concerned about the risk of being unemployed and the risk of inequality within the economy than they are about inflation.

So once more, the priorities of economics are simply wrong because it hasn't taken into consideration the realities of who we really are.

We don't make our decisions on the basis of certainty because we can't, because we know it doesn't exist.

We make our decisions on the basis of values; that is our ethics; what we think is important; how we think we should behave, what our moral judgments are, and so on.

We also use heuristics, or as they're more commonly called, rules of thumb. Those things that let us turn very complex data into something that we can understand.

For example, we can look at all the variety of products available in a supermarket, and there might be 30 or 40 products in front of, us all looking broadly similar, but we will use what is called a heuristic to decide which one we want.

We might decide that a high price means it's a good quality product.

Or we might decide that we had that particular one before and we liked it, and therefore we'll ignore the rest.

It doesn't matter what it is. The point is we've reduced the difficulty of decision making to some form of rule in this situation, which we can use to overcome the complexity which markets present us with. It may not be rational, but we do it because it works, and this is entirely different from the assumption that an economist makes.

And finally, we use maxims to guide our behaviour, and these are rules of good conduct. There are a couple of examples that might help here. One of these could be 'do no harm'. Another one could be 'love your neighbor as yourself'. These things provide us with an interpretation of our values that lets us translate them into behaviour in reality.

This is how we really decide, and this is what we do in the face of uncertainty. We have to form models that let us manage, so that in the face of data which is overwhelming, we can come up with actual decisions that we can live and work with. And that's what we do.

But that is not in any way reflected in the economics that we are taught, or which guides politics or which guides the thinking of the UK Treasury.

Now in that case, why do I still talk about economics?

Why don't I just abandon that whole idea of economics and talk about something else?

To some degree I do, of course, abandon discussion of economics because I talk about political economy, which is different from economics in the sense that it allows for the existence of power relationships, and how they allocate resources within the economy.

So, for example, I do allow for the existence of large companies in the way that I think and in the way that economists don't.

But also what I want to do is reclaim economics, the power of management of our decision making over the economy, so that it might serve our best interests rather than harming them, as it does now.

That is my goal, and understanding that economics is crap, is the first point that we need to reach on the journey to creating a better economics. When what we have is a completely rubbish approximation to the truth, having something that much better approximates to human behaviour is what we need if we're going to get the economics that we desire to make the world work.