Re: : RE: Lies, damned lies, and economics

[Eugene Coyle <eugenecoyle@xxxxxxx>]

Jim asked how I would teach, instead of neo-classical micro.

I've asserted that neo-classical is a story.  A story, propaganda,
designed and intended to subjagate.

Well, I would tell a different story.  The neoclassical story is that
firms maximize profits, fight competition by cutting prices, and so you
find prices driven down to the MC of the most efficient producer.  A
wonderful result for consumers.

    Of course that story isn't plausible, even to a lowly freshman.  So
here's a better one:  Firms try to maximize their share price, which means
behaving as they think will do that, not competing on price, cooperating
and/or colluding with other firms to share markets and keep prices high.
This can be taught out of standard Finance texts -- dynamic, rather than
static like neo-classical.  This story IS plausible to freshmen.  And to
the Rotary Club, etc.  And so the story can talk about exploitation of
workers, screwing of consumers, dumping pollution into the air and water.

    The neo-classical story re consumers is similarly implausible to any
adult.  The story is the one ridiculed by Veblen 100 years ago -- that we
are bits of quivering protoplasm reacting to prices and making decisions
independent of what everybody  else is buying.
 OF COURSE we are influenced by other people.  OF COURSE we learn to like
products, develop habits, not to say addictions.  We DON"T go up and down
a demand curve depending on the price.  Either of these changes in the
story smash neo-classical micro.

    I would tell a different story.  It is where we are influenced by
others, influenced by advertising, not independent at all.  I would use
something like Marris' chapter on Demand as a background for myself, and
flesh this out for the course.  This story would be plausible to students.

    I have to confess that when I did Micro this way it severely upset the
Department and the College and I no longer am in academia.  When I was job
hunting I was asked "Can you teach Henderson & Quandt?" -- a then high
level mathematical micro text.  I would reply "I can" not saying aloud the
rest of the sentence "but I won't."

    Ah, well, at least I can tell you how to teach.

Gene

"Devine, James" wrote:

> >And how are you (me, us) going to get an alternative theory if we keep
> honoring neoclassical models? <
>
> so what's your alternative?
> JD