How Do We Design Economic Behaviour to Enhance Social Governance?
Why are neoclassical microeconomic regulation and macroeconomic public policymaking often ineffectual?
Why are economies across the world malfunctioning, despite liberalization and globalization?
Newly published by World Scientific, this title Inclusive Economic Theory revisits the foundations of economic theory to answer these and a host of other similar questions. It shows that neoclassical rationalism, including Herbert Simon's refinements is predicated on 20 weak or fatally flawed axioms that tarnish claims for Pareto competitive efficiency.
People have sketchy preference functions and are short-sighted. Suppliers have only a tenuous grasp of production and market reaction functions, and economic actors including politicians often exert power and are unscrupulous. While it is true that individuals are constrained by budgets and frequently react appropriately to price signals, this isn't enough to assure Pareto desirable outcomes because people don't always know what to do, choose erratically and flagrantly violate social contracts. Neoclassical micro and macroeconomic theory isn't entirely wrong, it just glosses the truth.
The deficiency is easily remedied by dropping the Enlightenment idealist presumption that people are comprehensively rational and morally upright, and integrating omitted motives into an inclusive economic framework. The result is a more powerful economic theory and method that encompasses virtuous optimizing and satisficing where they apply, and supplements them with other strategic motives when they don't.
This "nested umbrella" of idealist, realist and neo-realist elements enables analysts to grasp how economic actors really behave and interpret the results with what Karl Popper calls "truth-like verisimilitude." The method shatters neoclassical theory's harmonious façade. It illuminates contemporary disorders and provides a solid foundation for improved systems building and social governance by advancing the mainstream, without brushing neoclassical theory aside.
The book retails for US$96 and £63 at major bookstores. More information can be found at http://www.
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