Fred Zaman — Rethinking Keynes’ non-Euclidian theory of the economy

What did Keynes (and Davidson) miss? Institutional power. Why did they forget or ignore this? Likely because it is "Marxist." Sociologists have acknowledged that power is fundamental institutionally. Conventional economics rules out its consideration, assuming that the labor market is nearly perfectly competitive, information is symmetrical, and power is equal, which is nonsense sociologically.

Two axioms of classical economics that Keynes kept, however, and with
which keeping Davidson concurs, are (1) people are self-interested and try to
 protect their income and wealth; and that (2) firms try to maximize profits
($REF).

These two axioms keep hidden far more than they disclose,
however. For people are not only individually inclined to protect (and increase)
their income and wealth: (1A) they collectively also are very much inclined to
 protect (and increase) their income and wealth in common cause, to the extent
 deemed necessary even at the expense of others not of their own group. And firms
 also: (2A) collectively in common cause to the same extent, are similarly
 inclined to maximize their profits above all else, even at the expense of other
 groups not of their own. Understanding this truth about collective action in
 economics (in politics also), one can replace the word “collisions” in the above
 quotation of Keynes with “collusions,” for collusion (by the favored few) is
generally the best means by which to accomplish axioms (1A) and
(2A).

What are we to make of these axioms in the Euclidian analogy of
economics, regarding behavior collectively favoring for those of one’s own kind,
and conversely detrimental to those not of one’s own kind? It is simply that the 
lines running parallel to each other, which in this analogy represent full
employment in an efficient market, are actually not straight and do meet, simply
 because of collusion against workers (and the general populace) by capitalists
 working behind closed doors. The efficient market thus is degraded through the
 collusion of others (both individuals and firms) working according to the 
non-Euclidean axioms 1A and 2A. The free market, when it thus is not subject to
government regulation and oversight that minimizes the detrimental effects (to
workers and the general populace) of these non-Euclidean axioms (tends to make
 the economic lines more parallel), is inherently a very non-Euclidean space....

Real-World Economics Review Blog
Rethinking Keynes’ non-Euclidian theory of the economy
Fred Zaman