The Original Error
Why are there recessions?
Why can firms earn persistently high profits?
Why do wages depend so dramatically on where people live?
The Original Error argues that these are not separate puzzles. They arise from a foundational mistake in how economics understands production.
That mistake has endured for two centuries, surviving successive revolutions in economic thought even as the discipline made genuine advances. Philosopher Mathew Coakley traces its path through that history to explain why increasingly sophisticated macroeconomic models continue to encounter the same unresolved problems.
He then shows how correcting the error offers new explanations of how firms are organised, how income is distributed and why recessions recur. The argument proceeds from clearly stated assumptions, step by step, allowing readers to assess its conclusions for themselves.
Written for thoughtful non-specialists as well as economists and philosophers, The Original Error is a bold investigation into the ideas shaping our understanding of crises, growth and inequality.
Something structural has been going on. And going wrong.
Inside the book
Part One: Progress and the Puzzle of Macroeconomics (1776 – 1936)
Why inherited economic theory struggles to explain recessions, involuntary unemployment and economies that remain below capacity.
Part Two: Attempted Solutions (1936 - present)
The achievements and limitations of Keynesianism, Monetarism, Real Business Cycle Theory and modern friction-based macroeconomics.
Part Three: Further Puzzles
How persistent puzzles involving profits, investment, firms, equity returns, bargaining and productivity point to a deeper problem.
Part Four: Rethinking Production Theory
Why the conventional factor-based theory of production goes wrong – and the case for Asset Theory as a rival foundation.
Part Five: Back to the Puzzles
How Asset Theory yields new explanations of firms, wages, trade and recessions.
“A conceptual tour de force and a page-turner too. The Original Error should have a profound impact on macroeconomic theory. After reading it, you become convinced that the original error of macroeconomics was hiding in plain sight.”
– Alex Rosenberg, Professor of Philosophy, Duke University and recipient of the Lakatos Award in philosophy of science
"Coakley asks readers to reconsider some of the most familiar ideas in economics from the ground up. By arguing that persistent puzzles share a common flaw in production theory, he offers a genuinely new perspective on firms, profits, wages and the business cycle.”
– Gregory Thwaites, Associate Professor of Economics, University of Nottingham and the former Head of International Research at the Bank of England
"It is an intriguing and controversial book that will push economists to think hard about how and why we use the models we do to help us navigate the most important economic policy choices facing society."
– Greg Kaplan, Professor of Economics, University of Chicago
“Accessible to any curious reader without a single equation, The Original Error makes a bold and surprising case that macroeconomics keeps failing not because of missing details but because of a foundational mistake in the underlying theory. Ambitious in scope and consistently eye-opening.”
– Michael Kates, Associate Professor of Philosophy, St. Joseph’s University