James K. Galbraith's Heterodox Economics, Tariffs, Bitcoin

From here (an interview with Lynn Paramore):

Economics has a dirty secret.

What if a core principle of mainstream economic theory—still taught in top universities, printed in textbooks, and shaping policy for all of us—is completely wrong? What if the iconic supply and demand chart every econ student knows by heart doesn’t actually capture the reality of how economies work?

That’s the claim of noted economist James K. Galbraith, who argues this is a “calamity.” His big problem with mainstream economics is its obsession with a 19th-century illusion: equilibrium.

Here’s the gist: general equilibrium theory—the foundation of modern economics—rests on the idea that markets naturally balance themselves over time. It assumes all economies are just a collection of independent markets, each one perfectly matching supply and demand. The theory leads to some wild assumptions: poor countries are poor because they’re “out of equilibrium,” and prosperity in developed countries is proof that free markets work—ignoring the fact that these markets sometimes crash, only to be brushed off as “unpredictable shocks.”

Galbraith thinks the real issue is that economists have been avoiding one essential truth: entropy. In physics, entropy is the force that drives the universe, and it’s fundamental to all living systems, including economies. But neoclassical economists have stubbornly stuck with equilibrium, even though entropy and equilibrium are incompatible. One is a universal law of nature; the other is just a convenient abstraction.

In his new book, Entropy Economics: The Living Basis of Value and Production (co-authored with Jing Chen), Galbraith makes the case for an economic model that embraces entropy, aligning economic theory with life processes and physical laws—something that has real implications for how we understand markets, power, and regulation. He spoke with the Institute for New Economic Thinking about the implications of entropy economics and how it helps us better understand real-world events—from the rise of crypto to climate change—by revealing them for what they truly are.