Economics textbooks – anomalies and transmogrification of truth
This paper has been included in the publication
“The Economics Curriculum: Towards a radical reformulation”
Theories are difficult to directly confront with reality. Economists therefore build models of their theories. Those models are representations that are directly examined and manipulated to indirectly say something about the target systems. Even though all theories and models are false, they may still possibly serve our pursuit of truth. But then they cannot be unrealistic or false in any way. The falsehood has to be qualified. Many of the standard assumptions made in neoclassical economic theory are not possible to make more realistic by de-idealization or successive approximations without altering the theory and its models fundamentally. Three examples from neoclassical economics textbooks – on wage rigidities, the law of demand and revealed preferences – are given to warrant the assertion that some of the model assumptions made by neoclassical economics are restrictive – rather than harmless – and a fortiori cannot in any sensible meaning be considered approximations at all.