(1) classical loanable funds theory, with time preference explaining the interest rate;After all these have been thrown aside, there is not much left of mainstream economics.
(2) Wicksell’s natural rate of interest;
(3) neutral rates of interest;
(4) rational expectations;
(5) the belief that real world market economies can be modelled with single representative agent models where agents maximise utility;
(6) Ricardian equivalence;
(7) belief in a real world tendency to general equilibrium;
(8) belief that money is neutral (whether in the short or long run, or in the long run);
(9) the quantity theory of money;
(10) the law of demand as a universal law;
(11) the law of diminishing marginal utility as a universal law;
(12) the law of diminishing marginal productivity;
(13) the belief that firms equate price with marginal cost or move price towards marginal cost;
(14) the belief that agents maximise utility in the neoclassical sense;
(15) the belief that involuntary unemployment is fundamentally caused by inflexible wages.
(16) the idea that macroeconomics needs rigorous microfoundations.
Sunday, March 30, 2014
What is Wrong with Neoclassical Economics?
The list is a long one and includes practically every major theory: