Nat Dyer, "Ricardo’s Dream: How Economists Forgot the Real World and Led Us Astray" (Bristol UP, 2024)
Apr 28, 2025
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Nat Dyer, a writer and researcher in global political economy and a fellow of the Schumacher Institute, explores the evolution of economic thought. He delves into David Ricardo’s pivotal role in shaping economic theories that often detach from reality, emphasizing the influence of power and empire. Dyer critiques mainstream economic models, linking them to modern issues like trade dynamics and environmental crises. By challenging traditional views, he advocates for a more grounded approach to economics that addresses inequality and climate change.
David Ricardo's theories on comparative advantage, while foundational to globalization, oversimplified complex historical contexts like exploitation and colonialism.
The critique of abstract economic models highlights their limitations in capturing real-world complexities, leading to misguided policies and social challenges.
Recent shifts in economic thought prioritize inequality and environmental issues, indicating a potential renaissance towards more holistic and effective economic practices.
Deep dives
The Evolution of Ricardo's Legacy
David Ricardo is positioned as a pivotal figure in the history of economics, often regarded as the founder of international economics. His work on comparative advantage, which posits that even if one country is less efficient in all sectors, trade can still be beneficial, laid a theoretical foundation for globalization. This theory, however, has been criticized for oversimplifying economic interactions by ignoring historical contexts, leading to detrimental consequences for nations entangled in trade. The realities of exploitation and colonialism, particularly in the case of countries like Portugal during their trade with England, reveal a complex truth that Ricardo's models often overlook.
Critique of Economic Models
The reliance on abstract economic models has raised significant concerns regarding their real-world applicability, leading to the assertion that these models can act as 'weapons of mass distraction.' Economists often focus on quantifiable data, which can create an illusion of precision while neglecting critical elements such as social dynamics, environmental impact, and human behavior. This focus results in oversimplifications that fail to capture the complexities of the economy, leading to policies that can exacerbate social and environmental issues. The critique emphasizes the need for models that incorporate a broader range of variables to produce more accurate predictions and effective solutions.
Globalization's Naïve Beliefs
The early 2000s showcased a naiveté surrounding globalization, where the belief that free trade was a tide that would benefit all nations prevailed. This perspective inadequately addressed the disparities and exploitative practices often accompanying international trade, particularly in developing nations. Economic models promoting unfettered markets were frequently employed to justify policies without recognizing the social and environmental fallout of such decisions. Consequently, the emphasis on profit maximization over equitable benefit distribution has sparked growing skepticism about the assumptions underlying mainstream economic thought.
Climate Models' Limitations
The intersection of economics and climate science has been fraught with challenges, particularly as climate models often exclude crucial environmental factors in their calculations. Prominent economists like William Nordhaus have been criticized for downplaying the economic impact of climate change, leading to policies that could inadequately address urgent environmental concerns. The issue arises from the cherry-picking of assumptions that creates misleading conclusions, allowing policymakers to postpone necessary action in climate regulation. This disconnect underlines the necessity for economic frameworks that genuinely integrate ecological realities into their models.
Hope for a New Economic Framework
Emerging trends indicate a shift towards economics that account for inequality and environmental concerns, inspired by thinkers like Thomas Piketty and movements advocating for more equitable corporate practices. This evolution reflects a growing recognition of the limitations of classical economic models, encouraging new methodologies that prioritize human and ecological considerations. Visions for a more holistic approach suggest that by embracing the complexity of social realities, economics can potentially guide more effective solutions for pressing global issues. Such developments offer a glimmer of hope that the discipline of economics may see a renaissance that brings it closer to addressing the real-world challenges of our time.
From the workings of financial markets to our response to the ecological crisis, economic theory shapes the world. But where do these ideas come from?
Ricardo’s Dream: How Economists Forgot the Real World and Led Us Astray (Bristol University Press, 2024) tells the fascinating story of David Ricardo, Adam Smith’s only real rival as the ‘founder of economics’. The wealthiest stock trader of his day, Ricardo introduced the study of abstract models to economics. He also developed the theory of trade that underpinned globalization and hides, behind its mathematical facade, a history of power, empire, and slavery.
Brimming with fresh ideas and stories, Ricardo’s Dream shows how too many economists, from Ricardo’s day to our own, have turned away from observing the real world and led us astray.
Nat Dyer is a writer and researcher specialising in global political economy. He is a Fellow of the Schumacher Institute and the Royal Society of Arts. He has worked for Global Witness and for Promoting Economic Pluralism and his stories have been reported on by the BBC, the New York Times and Bloomberg
Morteza Hajizadeh is a Ph.D. graduate in English from the University of Auckland in New Zealand. His research interests are Cultural Studies; Critical Theory; Environmental History; Medieval (Intellectual) History; Gothic Studies; 18th and 19th Century British Literature. YouTube channel. Twitter.
