Wednesday, 1 February 2017

A Major Problem With Mainstream Economics


A major problem with mainstream economics has for a long time been an obsession with theoretical equilibrium rather than the real world. As Mises pointed out in Human Action
“Both the logical [e.g. Austrian school] and the mathematical [e.g. neoclassical] economists assert that human action ultimately aims at the establishment of such a state of equilibrium and would reach it if all further changes in data were to cease. But the logical economist knows much more than that. He shows how the activities of enterprising men, the promoters and speculators, eager to profit from discrepancies in the price structure, tend toward eradicating such discrepancies and thereby also toward blotting out the sources of entrepreneurial profit and loss. He shows how this process would finally result in the establishment of the evenly rotating economy. This is the task of economic theory. The mathematical description of various states of equilibrium is mere play..."

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