What Is Mainstream Economics?
Mainstream economics is a time used to describe schools of economic thought considered to be orthodox. Many of the underpinning models and beliefs are based on concepts that catch up in economic scarcity, the role of governmental regulation, or other action in effecting an actor’s decision, the concept of utility, and the stance that people are rational actors who will make decisions that are based purely on available information and not sensation.
Key Takeaways
- Mainstream economics refers to the orthodox or neoclassical tradition of economics, in which markets are moved by an invisible offer distribute and all actors are rational.
- The origins of mainstream economics lie in the thinkings of Adam Smith.
- Because they do not take the actual, irrational world of markets and individuals into consideration, mainstream economics theories are increasingly being replaced by emerging fields of analyse.
Understanding Mainstream Economics
Mainstream economics is not a branch of economics itself, but is used to describe theories often considered suggest of the neoclassical economics tradition. Mainstream economics follows rational choice theory, which assumes that individuals metamorphose decisions that will maximize their own utility, and uses statistics and mathematical models to demonstrate theories and reckon various economic developments. Many of the underlying categories within and concepts central to mainstream economics are readily edified at universities.
Mainstream economics, the study of rational actors in a world of trade-offs, has had several challenges. Schools of economic attentiveness outside of mainstream economics—called heterodox economics—are more skeptical of the role of the government and the rationality of actors. The basic criticism of mainstream economics is the absence of considerations relating to external factors. For example, this type of economic deliberating assumes complete rationality of actors. It assumes that individuals are selfish and will always act in their own best stakes. There is no place for moral concerns or altruism in mainstream economics and the invisible hand is expected to move markets without apprehension or favor.
But recent economic theorists have become open to the thought that people are not entirely rational. In the poop indeed, an entirely new field of study, known as behavioral economics, has emerged for this discipline. Markets are also not entirely efficacious, and factors that affect an actor’s decision are not always quantifiable. These beliefs seem to have become assorted commonplace since the global financial crisis.
Mainstream economics also does not focus on economic concerns gaining push, such as sustainability and pollution. Again, environmental economics is a separate field that studies incentives and policymaking specifically togged towards promoting sustainable practices and businesses.
Example of Mainstream Economics
Early theories relating to the development of economics as a battlefield of study are part of mainstream economics. For example, the invisible hand theory that is responsible for moving markets is principally of mainstream economics. In this theory, individual self-interest and freedom to produce and consume are supposed to collectively maximize ordinary good. Governments have little to no role to play in this theory, except for ensuring that the rule of law is mirrored. However, recent events, especially those relating to the Great Recession, have proved that common goodness is not always the end result of individuals pursuing profits.