The heart of mainstream economics

Jim Byrne

You need assumptions to build useful economic models – but those assumptions should not influence the results.

I have previously hinted that mainstream economists’ models are based on assumptions that are unrealistic. Those assumptions are primarily based on a view of human nature that reflects a particular ideological viewpoint. That view of human natures is of self-interested, rational, all-knowing individuals, making choices to maximise their personal satisfaction.

At the heart of mainstream economics is the lone individual. Thatcher’s individual. Reagan’s individual.

“There is no such thing as society. There are individual men and women, and there are families. And no government can do anything except through people, and people must look to themselves first.” — Margaret Thatcher, Woman’s Own magazine in 1987

However, all individuals are part of a family, a community, a school, a workplace, a town, a country. And all individuals are influenced by marketeers, propagandists and, of course, their education, environment, and class background.

So, sure, simplified theories are essential but when you have an ideological viewpoint at the root of your theory and you are selling that theory with religious zeal, are you part of an academic discipline or a high priest, teaching the gospel of neoliberalism?

To get back to my argument: this is no way to study how the economy works; this is no way to diagnose economic problems; and this is no way to develop useful economic policies.

See my article: Seven reasons for adopting the MMT approach and one good reason for dumping neoliberal economics https://lnkd.in/e8MP6Guq

 

Source: Jim Byrne, LinkedIn network, 25 https://www.linkedin.com/in/jim-byrne-358225363/recent-activity/

About Jim Byrne: As long as I can remember, I’ve been interested in economics. As a university student in the 1980s, I studied politics and economics in my social science honours year. And in 2021, I completed the master’s-level Foundations of Modern Money, Institutions and Markets module, run by Steven Hail and his colleagues at Torrens University Australia.