There have been two major contributions to economic theory in my lifetime. One is behavioral economics. The other is evolutionary economics. The revolutions induced by these new approaches are by no means complete. Their ramifications are still being worked out in the professional economics journals.
Behavioral economics abandons the traditional notion that rational choice alone can explain human behavior in favor of patterns of choice that are inferred from laboratory and field studies of actual human subjects. Evolutionary economics views the economy as a dynamical evolving system that can be modeled using the combined tools of economic and biological theory. Evolutionary economics treats individuals as the product of their biological and social history, and so fits in well with behavioral economics.
Many behavioral and evolutionary economists consider themselves allies in a battle against the principles of traditional economic theory, and many supporters of traditional economic theory share this mind set—except that they are on the other side of the conflict. This oppositional mind-set is profoundly incorrect and leads to serious errors both in developing economic theory and presenting it to the general public.Useful summary.
The most creative behavioral and evolutionary economists remain inspired by the successes of, and consider their work as extensions of traditional economic theory. The most creative supporters of traditional economic theory, in turn, embrace behavioral and evolutionary perspectives and build on its insights.
In this article I will suggest the proper way to treat the new economic theory in relation to the old. I encourage readers to offer significant critiques of or additions to my comments.…
Examines market failures, which is really the way to approach economics rather than to assume general equilibrium precludes market failures or make then irrelevant "in the long run." Market failures sufficiently large and persistent have not only economic but also social and political consequences. Therefore, understanding and reducing market failure is of the highest priority.
How to Synthesize New Economics with Traditional Economics