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Foundations of Economics: A Beginner's Companion
The book covers all the main economic concepts and addresses in detail three main consumption and choice, production and markets and government and the State.
420 pages, Paperback
First published January 1, 1998
70 people are currently reading
2104 people want to read
About the author
Yanis Varoufakis
60 books2,424 followersIoannis "Yanis" Varoufakis is a Greek-Australian economist and politician. A former academic, he has been Secretary-General of MeRA25, a left-wing political party, since he founded it in 2018. A former member of Syriza, he served as Minister of Finance from January to July 2015 under Prime Minister Alexis Tsipras.
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Displaying 1 - 13 of 13 reviews
September 17, 2009
An expert introduction to economics that blows the huge textbooks by Sloman and Mankiw into orbit if you are interested in really knowing what the subject is all about. For a non-English native, albeit one who has spent a fair bit of time living in Australia, Varoufakis has a superb turn of phrase and is in a small band of economists - Philip Mirowski, Deirdre McCloskey, Geoff Hodgson, Jason Potts are others - who can actually claim distinction as a writer. The book concentrates on theory and comes down heavily on the side of heterodox thinking - it's a swingeing attack on the falseness of neoclassical ideology and deserves a much wider audience.
January 7, 2015
Varoufakis set himself a very difficult task here, and his success is uneven. His goal is to provide an exposition and history of the basic concepts of neoclassical economics, and a criticism of them as well. For the most part, his exposition is excellent, and readers looking for an introductory critical perspective on neoclassical economics would do well to begin here (it is a bit more readable than Steve Keen's Debunking Economics, for example). However, the criticisms he provides, couched at the same level as the introduction, are too frequently "gotcha" jabs that would hardly withstand a serious response from neoclassicals. That's not to say there is nothing valuable here. The discussion and critique of welfare economics, in particular, is quite good. However, when it comes to marginal utility and production functions, Varoufakis' critique is quite shallow. Overall, a good introduction, but if you've already spent some time with critiques of economics, you may want to look elsewhere to broaden your foundation.
February 14, 2019
Wonderful book. It does for the theoretical foundations of economics what Zinn did for US history.
December 1, 2024
"The purpose of studying economics is to learn how not to be deceived by economists." ― Joan Robinson, Basel Lecture, 1969
The above quote can be thought of as Varoufakis's mission statement here. If economics as an academic discipline makes you think of complex mathematical equations and endless graphs like supply and demand curves, you've been haunted by a spectre. The spectre of neoclassical economics—a narrow conception of economics that has, not without political and ideological reasons, achieved a virtual hegemony throughout the world's economics departments. Fortunately, we have Varoufakis to dispel such dogma for readers trying to get a more nuanced, comprehensive overview of the field. Committed to honest, theoretical debate, Foundations of Economics is a brilliant, heterodox introduction to neoclassical economics and its history, providing an in-depth critique of the standard textbook material while also drawing a lot of inspiration and supplementary material from history and philosophy.
Interestingly, the roots of neoclassical economics can be traced to an entirely different field: classical physics. In an attempt to imitate the tremendous success of the Newtonian revolution in physics, a strand of economists in the second half of the 19th century started to heavily mathematize their field and develop it from first principles—in this case, the equi-marginal principle, or the idea that humans (and later, by extension, corporations) can be wholly determined by treating them as utility-maximizing entities. Of course, this is an enormous oversimplification of really existing social and political conditions, not to mention human nature (many examples are provided in the text). Are we truly all utility-maximizing creatures? Should we be? Is satisfying our preferences and indulging in our current desires all we should aspire to? What about developing better preferences?
Furthermore, the book demonstrates why the theory's aspiration towards philosophical positivism is fundamentally inconsistent, as economic theories in general are neither scientifically falsifiable nor verifiable. This is as true for neoclassical economics as it is for Keynesianism or Marxism. Why? Because incorrect predictions can always be blamed on the "irrational" behaviour of individuals. Moreover, the very act of making a prediction may very well influence its own outcome: imagine a highly regarded financial analyst predicting a sharp decline in the stock market tomorrow―a self-fulfilling prophecy in the making, even if it may have been a mere joke. This is radically different from the behaviour of atoms in the physicist's laboratory, which neither care for her predictions nor can they be blamed should they not act according to theory.
Varoufakis also accuses neoclassical economists of being fundamentally dishonest, due to the way they attempt to hide their decidedly pro-market politics behind fancy equations whose philosophical assumptions are sold as "facts" (this should, incidentally, explain why Varoufakis often refers to economics as "religion with equations" in interviews and talks). "The best way of pushing one's political agenda", Varoufakis writes, "is to convince others that one does not have one!" And thus the commodification of everything from labour power to education and even information is justified through an abstract mathematical framework that is sold as "rational" and "natural", even though it ultimately does little else other than to replace values with prices and to obscure the asymmetrical power relations that lead to the exploitation of workers, the community, and the environment.
Alternatives like Piero Sraffa's "pure production model" and John Rawl's "theory of distributive justice" are discussed in later sections of the book, albeit without any attempts at idealisation whatsoever: every economic theory has its necessary shortcomings, and choosing which one to subscribe to is a political process, not a scientific one. Indeed, Arrow's impossibility theorem―the bane of many a neoclassical textbook―confirms this with mathematical precision: there can be no objectively best social utility (i.e. welfare) function that accurately reflects the aggregate utility functions of all individuals. Varoufakis concludes:
"After hovering in the ethereal world of mathematics and geometry, economics was forced to crash-land and take its place in the real world of political debate. Do economists wish to pursue the Good Society in the spirit of the social contract tradition which started some time in ancient Greece, reasserted itself in Europe with J.-J.Rousseau and found its apotheosis in John Rawls? Or do they wish for a social contract which effectively rules the State out as anything other than a provider of order and security—a tradition which began with Thomas Hobbes and culminated in Robert Nozick's theory? Or, indeed can economists think of something in between?
Thus economics is back into the mire courtesy of Arrow's third theorem, which dispels any hopes of a Rational Society springing from some form of advanced utility maximisation. Economics can no longer escape the political, philosophical debates which resonate across the humanities—from literature to sociology and from politics to moral philosophy. This is a good thing. At last, economics can become interesting again after a century of continuous pedantry."
The above quote can be thought of as Varoufakis's mission statement here. If economics as an academic discipline makes you think of complex mathematical equations and endless graphs like supply and demand curves, you've been haunted by a spectre. The spectre of neoclassical economics—a narrow conception of economics that has, not without political and ideological reasons, achieved a virtual hegemony throughout the world's economics departments. Fortunately, we have Varoufakis to dispel such dogma for readers trying to get a more nuanced, comprehensive overview of the field. Committed to honest, theoretical debate, Foundations of Economics is a brilliant, heterodox introduction to neoclassical economics and its history, providing an in-depth critique of the standard textbook material while also drawing a lot of inspiration and supplementary material from history and philosophy.
Interestingly, the roots of neoclassical economics can be traced to an entirely different field: classical physics. In an attempt to imitate the tremendous success of the Newtonian revolution in physics, a strand of economists in the second half of the 19th century started to heavily mathematize their field and develop it from first principles—in this case, the equi-marginal principle, or the idea that humans (and later, by extension, corporations) can be wholly determined by treating them as utility-maximizing entities. Of course, this is an enormous oversimplification of really existing social and political conditions, not to mention human nature (many examples are provided in the text). Are we truly all utility-maximizing creatures? Should we be? Is satisfying our preferences and indulging in our current desires all we should aspire to? What about developing better preferences?
Furthermore, the book demonstrates why the theory's aspiration towards philosophical positivism is fundamentally inconsistent, as economic theories in general are neither scientifically falsifiable nor verifiable. This is as true for neoclassical economics as it is for Keynesianism or Marxism. Why? Because incorrect predictions can always be blamed on the "irrational" behaviour of individuals. Moreover, the very act of making a prediction may very well influence its own outcome: imagine a highly regarded financial analyst predicting a sharp decline in the stock market tomorrow―a self-fulfilling prophecy in the making, even if it may have been a mere joke. This is radically different from the behaviour of atoms in the physicist's laboratory, which neither care for her predictions nor can they be blamed should they not act according to theory.
Varoufakis also accuses neoclassical economists of being fundamentally dishonest, due to the way they attempt to hide their decidedly pro-market politics behind fancy equations whose philosophical assumptions are sold as "facts" (this should, incidentally, explain why Varoufakis often refers to economics as "religion with equations" in interviews and talks). "The best way of pushing one's political agenda", Varoufakis writes, "is to convince others that one does not have one!" And thus the commodification of everything from labour power to education and even information is justified through an abstract mathematical framework that is sold as "rational" and "natural", even though it ultimately does little else other than to replace values with prices and to obscure the asymmetrical power relations that lead to the exploitation of workers, the community, and the environment.
Alternatives like Piero Sraffa's "pure production model" and John Rawl's "theory of distributive justice" are discussed in later sections of the book, albeit without any attempts at idealisation whatsoever: every economic theory has its necessary shortcomings, and choosing which one to subscribe to is a political process, not a scientific one. Indeed, Arrow's impossibility theorem―the bane of many a neoclassical textbook―confirms this with mathematical precision: there can be no objectively best social utility (i.e. welfare) function that accurately reflects the aggregate utility functions of all individuals. Varoufakis concludes:
"After hovering in the ethereal world of mathematics and geometry, economics was forced to crash-land and take its place in the real world of political debate. Do economists wish to pursue the Good Society in the spirit of the social contract tradition which started some time in ancient Greece, reasserted itself in Europe with J.-J.Rousseau and found its apotheosis in John Rawls? Or do they wish for a social contract which effectively rules the State out as anything other than a provider of order and security—a tradition which began with Thomas Hobbes and culminated in Robert Nozick's theory? Or, indeed can economists think of something in between?
Thus economics is back into the mire courtesy of Arrow's third theorem, which dispels any hopes of a Rational Society springing from some form of advanced utility maximisation. Economics can no longer escape the political, philosophical debates which resonate across the humanities—from literature to sociology and from politics to moral philosophy. This is a good thing. At last, economics can become interesting again after a century of continuous pedantry."
August 21, 2019
I was so skeptical when I started studying micro economics this book kinda pushed my skepticism further,I liked this book but i wonder why the author didn’t mention behavioral economics.
October 15, 2022
The parasitic class teaching the slaves what to think so the system will be perpetuated. Is the corporation bad? Varoufakis will teach you to love and obey the biggest corporation of them all, the one that can put you in jail or send you to kill other slaves whose mortal sin is to have been born under a different corporation.
January 28, 2016
Very thoughtful critique of mainstream economics.
March 20, 2022
Introductory level to the discipline, with good topics discussed (4.5). "Economics is dominated by history and ideology", while at the same time there is an elasticity of renewal (reconciliation) and development within the discipline (empirical economics claims to have removed itself from political arguments by using the law of margins). The main discussion of neoclassical economics seems to have lagged a little (English first edition 1998, History of Ideas). Good section on the sources, dilemmas of rational choice theory. Social utility cannot be based on individual utility functions (the problem of defining the "public good" by Arrow, Social Choice and Individual Values) (the dilemma of classical economics, especially trade theory). Finally, we return to the discussion of political philosophy (Marx, Keynes-Rawls, Nozick). To be clear about the conditions and boundaries of applicability of disciplines and theories.
February 1, 2025
Me gustó bastante. Varoufakis ofrece un libro bien estructurado presentándonos conceptos básicos de la economía neoclásica, la historia detrás de ellos, y una crítica a cómo son aplicados o construidos.
En la segunda mitad del libro, tras reiterar sus fuertes críticas a ésta escuela de pensamiento económico, nos invita sin embargo a permanecer en el estudio de la economía no para encontrar verdad en ella sino para entender y defendernos de las ideas neoliberales que infectan a otras disciplinas e incluso a la vida diaria.
Me resalta mucho uno de sus puntos al final del libro, sobre como el priorizar resultados favorables que sirvieran para perpetuar sus teorías llevaron a que se dejara de necesitar estudiar la misma teoría para aplicarla, dando pie a carreras como la que estudio y las que se encuentran a mi facultad.
Para pensarlo todo señores.
En la segunda mitad del libro, tras reiterar sus fuertes críticas a ésta escuela de pensamiento económico, nos invita sin embargo a permanecer en el estudio de la economía no para encontrar verdad en ella sino para entender y defendernos de las ideas neoliberales que infectan a otras disciplinas e incluso a la vida diaria.
Me resalta mucho uno de sus puntos al final del libro, sobre como el priorizar resultados favorables que sirvieran para perpetuar sus teorías llevaron a que se dejara de necesitar estudiar la misma teoría para aplicarla, dando pie a carreras como la que estudio y las que se encuentran a mi facultad.
Para pensarlo todo señores.
October 15, 2025
An amazing introduction to heterodox economics, a must read for all the little people out there. We can be wretched, but Yanis is there to save us. If you're like me, searching for an introductory academic book that also fits in the popular genre of economics, this is it. I'm glad I found this gem. Yanis delivers, as always.
July 13, 2020
16% and done.
See that.
I’ve told you.
It’s easy.
Just when it is starting to talk about numbers and figures and formula, I just known it has nothing further important for me to read it.
See that.
I’ve told you.
It’s easy.
Just when it is starting to talk about numbers and figures and formula, I just known it has nothing further important for me to read it.
July 12, 2016
Economics, not even once.
September 12, 2016
Great book. On of a few examples that I know of trying to disprove a theory you don't like without trying to distort it or ridicule it or concentrate on petty details.
Displaying 1 - 13 of 13 reviews