Logical Problems and the Teaching of Economics - A Plea for an Explanation
17 Pages Posted: 24 Nov 2008 Last revised: 13 Feb 2009
Date Written: December 23, 2008
Abstract
The basic academic education in economic thinking is dominated by very simplified models of firms and individuals in the market. The theory of firm, which is the fundamental model of neoclassical microeconomics, therefore has great influence on the way people think about economic processes. The following paper elaborates logical inconsistencies of the standard model of neoclassical microeconomics first raised by George Stigler and extensively discussed by Steve Keen, which arise if all actors are considered to be mere price-takers. Taking this inconsistencies seriously leads to the conclusion, that - interpreting the marginal market power of the individual firms correctly - a competitive environment yields quantities, prices and profits, that differ fundamentally from those predicted by standard neoclassical microeconomic models. Therefore we want to encourage the teachers of economics to enter the debate around these inconsistencies.
JEL Classification: A22, A23, D41, D43
Suggested Citation: Suggested Citation