From this failure to expunge the microeconomic foundations of neoclassical economics from post-Great Depression theory arose the "microfoundations of macroeconomics" debate, which ultimately led to a model in which the economy is viewed as a single utility-maximizing individual blessed with perfect knowledge of the future. Fortunately, behavioral economics provides the beginnings of an alternative vision of how individuals operate in a market environment, while multi-agent modelling and network theory give us foundations for understanding group dynamics in a complex society. These approaches explicitly emphasize what neoclassical economics has evaded: that aggregation of heterogeneous individuals results in emergent properties of the group, which cannot be reduced to the behavior of any "representative individual." These approaches should replace neoclassical microeconomics completely.
An essential pedagogic step here is to relegate the teaching of mathematical methods in economics to mathematics departments. Any mathematical training in economics, if it occurs at all, should come after students have at the very least completed course work in basic calculus, algebra and differential equations (the last being one about which most economists are woefully ignorant). This simultaneously explains why neoclassical economists obsess too much about proofs and why non-neoclassical economists, like those in the Circuit School, experience such difficulties in translating excellent verbal ideas about credit creation into coherent dynamic models of a monetary production economy.
Neoclassical economics has effectively insulated itself from the great advances made in science and engineering over the last 40 years. This self-imposed isolation must come to an end. For while the concepts of neoclassical economics appear difficult, they are actually quaint in comparison to the sophistication evident in today's mathematics, engineering, computing, evolutionary biology and physics. In order to advance, economics must humbly submit to learning from disciplines that it has studiously ignored for so long. Some researchers in outside fields have called for the wholesale replacement of standard economics curricula, using at least the building blocks of modern thought inherent in other disciplines.
Even philosophies who have denounced pseudosciences like psychoanalysis, have condoned pseudoscientific economic theories like neoclassical microeconomics. It is far safer and easier to criticize Freud and Jung than to criticize Milton Friedman and Friedrich Hayek, because the latter are backed by political movements whereas the former are not.
Pirates are the very essence of profit maximising entrepreneurs described in neoclassical economics. Yet, whilst films such as 'The Pirates of the Caribbean' and 'Butch Cassidy and the Sundance Kid' have gone a long way to popularise both pirates and outlaw behaviour, the truth of the matter is that piracy is illegal, and it kills.
Neoclassical economics is precisely the theory one would expect a vastly complex system of international corporations, world markets, and interconnected currencies to create to sustain, justify, explain, and predict "itself." And classical economics, correspondingly, was a predictable expression of an earlier European capitalism.
Roger M. Keesing
As Thorstein Veblen correctly surmised over a century ago, the failure of economics to become an evolutionary science is the product of the optimizing framework of the underlying paradigm, which is inherently antithetical to the process of evolutionary change. This is the primary reason why the neoclassical mantra that the economy must be perceived as the outcome of the decisions of utility-maximizing individuals must be squarely rejected.
The fallacy that dynamic processes must be modeled as if the system is in continuous equilibrium is probably the most important reason for the intellectual failure of neoclassical economics. Mathematics, science and engineering developed tools long ago to model outside of equilibrium processes. This dynamic approach to thinking about the economy should become second nature to economists.
Economic theorists, like French chefs in regard to food, have developed stylized models whose ingredients are limited by some unwritten rules. Just as traditional French cooking does not use seaweed or raw fish, so neoclassical models do not make assumptions derived from psychology, anthropology, or sociology. I disagree with any rules that limit the nature of the ingredients in economic models.
Economics also has to become a fundamentally monetary discipline-from the consideration of how individuals make market decisions through to our understanding of macroeconomics. The myth of "the money illusion" (which can only be true in a world without debt) has to be immediately dispelled, while our macroeconomics have to reflect a monetary economy in which nominal magnitudes matter, precisely because they are the link between the value of current output and the financing of accumulated debt. The dangers of excessive debt and deflation simply cannot be comprehended from a neoclassical perspective. The discipline must also become fundamentally empirical, in contrast to the faux empiricism of econometrics. By this I mean basing itself on the economic and financial data first and foremost-the collection and interpretation of which has been the hallmark of contributions by econophysicists-and by respecting economic history, a topic which has been systematically expunged from economics departments around the world.
There is a degree of emotional impact in the nature poetry of the eighteenth century which marks a shift in sensibility towards what came to be called 'the sublime'. The concept, from classical Greek, came to England through the French of Boileau, and reached its definitive explication in Edmund Burke's Philosophical Enquiry into the Origin of Our Ideas of the Sublime and the Beautiful (1757-59). This is a key text of the times, displaying an emphasis on feelings and on imagination, which is almost the antithesis of the neoclassical insistence on form and reason. Burke's idea of the sublime goes beyond natural beauty (although the beauty of nature is very much a part of it) and goes into the realms of awe, or 'terror'. The sublime is, for Burke, 'productive of the strongest emotion which the mind is capable of feeling'. Terror, emotion, feeling: all these represent a break from the intellectual rigours of the Augustan age, and are in one sense a reaction against the new pressures of society and bourgeois concerns... The link between the sublime and terror is most clearly seen in the imaginative exaggeration of the Gothic novel - a form which concentrated on the fantastic, the macabre and the supernatural, with haunted castles, spectres from the grave and wild landscapes. It is significant that the term 'Gothic' originally had mediaeval connotations: this is the first of several ways of returning to pre-Renaissance themes and values which is to be found over the next hundred years or so. The novels of the 1760s to the 1790s, however, gave the term 'Gothic' the generic meaning of horror fantasy. The Castle of Otranto (1764) by Horace Walpole (son of the prime minister Sir Robert Walpole) was the first of this kind, and the sub-genre has flourished ever since... .. Like many texts of its times, Walpole's novel purported to be a translation of an ancient manuscript dating from the eleventh or twelfth century. There was a strange fashion for these mediaeval rediscoveries, Thomas Chatterton and James Macpherson (Ossian) being notable contributors to the trend. Whether this was a deliberate avoidance of boastful originality or an attempt to give the works involved some spurious historical validity is not clear. Peter Ackroyd's novel Chatterton (1987) examines the phenomenon.