Could Economics be any more wrong?
Of what little I know about economics, it would seem as though most all models are predicated around a logically way in which commerce runs and people save and/or spend. It is the social science that studies the production, distribution, and consumption of goods and services.
I guess the most famous is the Keynesian economic theory:
Quote:
It derives from John Maynard Keynes, in particular his book The General Theory of Employment, Interest and Money (1936), which ushered in contemporary macroeconomics as a distinct field The book focused on determinants of national income in the short run when prices are relatively inflexible. Keynes attempted to explain in broad theoretical detail why high labour-market unemployment might not be self-correcting due to low "effective demand" and why even price flexibility and monetary policy might be unavailing. Such terms as "revolutionary" have been applied to the book in its impact on economic analysis.
Keynesian economics has two successors. Post-Keynesian economics also concentrates on macroeconomic rigidities and adjustment processes. Research on micro foundations for their models is represented as based on real-life practices rather than simple optimizing models. It is generally associated with the University of Cambridge and the work of Joan Robinson New-Keynesian economics is also associated with developments in the Keynesian fashion. Within this group researchers tend to share with other economists the emphasis on models employing micro foundations and optimizing behavior but with a narrower focus on standard Keynesian themes such as price and wage rigidity. These are usually made to be endogenous features of the models, rather than simply assumed as in older Keynesian-style ones.
The Chicago School of economics is best known for its free market advocacy and monetarist ideas. According to Milton Friedman and monetarists, market economies are inherently stable if left to themselves and depressions result only from government intervention Friedman, for example, argued that the Great Depression was result of a contraction of the money supply, controlled by the Federal Reserve, and not by the lack of investment as Keynes had argued. Ben Bernanke, current Chairman of the Federal Reserve, is among the economists today generally accepting Friedman's analysis of the causes of the Great Depression Milton Friedman effectively took many of the basic principles set forth by Adam Smith and the classical economists and modernized them, in a way. One example of this is his article in the September 1970 issue of The New York Times Magazine, where he claims that the social responsibility of business is “to use its resources and engage in activities designed to increase its profits…(through) open and free competition without deception or fraud.” This is tantamount to Smith’s argument that self interest in turn benefits the whole of society
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The problem is, people do not act like these models when it comes to unemployment, spending or saving. So why is it we place such importance on a non-science that has never been an indicator and in recent incidents have actually hurt our economy? When is ecomonics ever going to look towards social psychology? Is it?