We need to abandon the economist's notion of the economy as a machine, with its attendant concept of equilibrium. A more helpful way of thinking about the economy is to imagine it as a living organism.

Keynes tried to show that market economies could settle in equilibrium states in which the labour market did not clear, and in which the level of unemployment was high. He believed that this was due to a particular example of market failure, developed in his concept of effective demand.

Once the true relationship between inflation and unemployment is understood, with luck and skill, a free lunch is possible.

The linear, mechanistic view of the world which pervades orthodox economics is simply not capable of capturing the richness and complexity of the rhythms and fluctuations of developed economies.

But Adam Smith was a philosopher as well as well as an economist, famous in his time as much for his Theory of Moral Sentiments as for The Wealth of Nations. And as he understood so well, society is more than the sum of its individual parts.

The model of competitive equilibrium which has been discussed so far is set in a timeless environment. People and companies all operate in a world in which there is no future and hence no uncertainty.

The behavior of the economy as a whole, at the aggregate, macro-level, is built up from the individual equations at the micro-level.