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Problems of contemporary economics – Need for New Theory Problems of contemporary economics – Need for New Theory

Problems of contemporary economics – Need for New Theory - PowerPoint Presentation

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Problems of contemporary economics – Need for New Theory - PPT Presentation

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market economics theory economic economics market economic theory information free freedom satisfactory evolutionary reality komlos markets world search evol

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Slide1

Problems of contemporary economics – Need for New Theory

Radmilo V. Pešić

University of Belgrade

SerbiaSlide2

Do we need Economics at all?

To make students` life harder, to make economists more esoteric, to make economic profession more exclusive and better paid, to make politicians more addicted to economists, and to make journalists more ignorant…….???

Contemporary mainstream economics is just made for such purposes.

NO

! WE DO NOT NEED SUCH ECONOMICS.Slide3

What do we need, and why?

We need

economics knowledge in order

to:

to enable mankind to survive, grow and prosper

to protect humanity from its own greed

to make the World a better place

to save the

Planet for generations to come

Current ET is just a small fraction of a rich legacy that some clever scholars left us, and it serves as a scientific justification of current distribution.

New Economic Theory is the right answerSlide4

Why do we need NET?

Discrepancy between theory and reality

(university economics vs. real life economics,

Dept

of

Econs

. vs. MBA)

Diminishing explanatory power of economics

In spite of high-tech methods and techniques less science in it

(more and more abstract suppositions

, assumptions). Unsuccessful attempt to resemble theoretical physics

Impotence of economic policySlide5

What are the problems?

Perfect rationality axiom.

Information problem, (information gathering is costly, time consuming and misleading / information redundancy, selection and analysis problem)

Bounded rationality (Simon H.)

Behavioral economics, prospect theory (

Kahneman

,

Twersky

,

Knetch

, ….

etc

)Slide6

More problems……

Optimization. Do we optimize at all, or we just search for a satisfactory solutions?

Do we now what is optimal?

Consumer choice. How rational it really is? Advertising. Information bias. Transaction costs (transparent and hidden).

Profit maximization. Do entrepreneurs really maximize profits or just search for a satisfactory profit? Big firms, monopolist, may maximize. Small and medium sized only may try, through attempts and falls, but it is very costly and nearly impossible.

Most of economic agents in reality search for: Satisfactory profits, Satisfactory incomes, Satisfactory utility (

Shiozava

, Y. Nelson, R. Foster, J. and other Evolutionary economists)Slide7

More problems……

Illusion of OMNISCIENT and OMNIPPOTENT markets (

Bj

ö

rkman

, T. ; Jacobs, G. ;

Komlos

, J. etc.)

Confusion: free trade=free market ; Smith vs.

Walras

: Hayek vs. Keynes (

Bj

ö

rkman

, T.)

Illusion of Equilibrium (free market powers tend to equilibrium)

Free market=perfect competition=freedom of choice=political freedom=democracySlide8

More problems……

Abstraction is reduction of reality

We still believe that

the

abstraction

is

the

reality

Simplifying world

Model building is a dangerous trivialization

We have substituted philosophy with mathematics, and logics with statisticsSlide9

What are the solutions?

Humanistic Real-world Economics

Humanistic Economics in normative sense

Real-world Economics in positive sense

New Market

or Post-Market

Economy

without myths of the market (markets are man-made institutions)

Finding ways to avoid

Another Road to Serfdom

Avoiding dangerous dominance of corporative sector (instead of countervailing between states and corporations).Slide10

Post-Market Society

Information revolution,

Digital goods, free public goods

Networking (Mason, P)

Strength of networks> minimum bureaucracy, flexibility, quick change, changing leadership, informal character, voluntarism, freedom of choice

Political fear: leaving market economies and substituting market societies with networks freedom will be lost.

New concept of freedom

Another road to Serfdom

(Komlos, J). Slide11

Reference

Björkman

, T. 2016 The Market Myth.

Cadmus

, 2(6), May , 43-59.

Foster, J. 2011 Evolutionary macroeconomics: a research agenda.

Journal of

Evol

.

Econs

.

21 5-28.

Hoffman, R. 2012 On the Need for New Economic

F

oundations: A Critique on Mainstream Macroeconomics.

Cadmus

, 1(5), October, 74-85.

Jacobs, G. 2016 Foundations of Economic Theory: Markets, Money, Social Power and Human Welfare.

Cadmus

2(6), May ,

20-42.

Komlos

, J. 2014

What Every Economics Student Needs to Know and doesn't get in the usual Principles Text.

M.E. Shape, Armonk NY.

Komlos, J. 2016 Another Road to Serfdom.

Chalenge

, 59(6) , 491-518.

Nelson, R. R. 2013 Demand, supply, and their interaction on markets, as seen from the perspective of evolutionary economic theory.

Journal of

Evol

.

Econs

.

23 17-38.

Shiozawa

, Y. 2004 Evolutionary Economics in the 21

st

Century: A Manifesto.

Evol

. Inst. Econ. Rev.

1(1) 5-47.

Simon

,

H. 1991 Bounded

Rationality and Organizational

 

Organization

Science

2(1) 125–134.