Six different economic theories – rethinking economics presented by Tone Smith

Aug 3, 2021 by

Tone Smith was holding a discussion & lecture at the AEMS Summer School, where she talked about some of the problems concerning Economics like education in the universities. The problem is that the universities teach a very narrow range of theories, mainly only Neoclassical economics. But this theory is never called Neoclassical economics in the teachings. So students are never told that they are only learning one, among several possible theories and then they learn the formulas and memorize the models of the this particular economic theory.

In the first part of the lecture Tone Smith presented all aspects of economics like starting with the main problems of Neoclassical economic construction of all models.

In the second part Tone Smith briefly summarized of six different theories – Keynesian / Post Keynesian economics – the economy as an open and complex system, theory of aggregate demand, the need of active policy response by the public sector, monetary policy. Marxist economics – political and economic Marxism, understanding capitalism, labour theory of value, production and distribution of value added – exploitation, class relation, technology and alienation, crisis theory. Institutional economics – The role of institutions in shaping economic behavior and the economy, rules, norms, laws, bounded social rationality, rejects the naturalistic fallacy transaction cost, linked to evolutionary economics. Evolutionary economics – the central role of technology is driving economic development, centrality of innovation and entrepreneurs in this process. Feminist economics – critique of the patriarchal bias in economics, the absence of unpaid work traditionally performed by women, the importance of reproductive economics. Ecological economics – rejects the mainstream lack of dealing with the complexity of reality, the economy is embedded in the biophysical reality, rather than nature being external to it, thermodynamics, social metabolism, must understand the dependence of modern society on fossil fuels.

Especially interesting in Tone Smith`s presentation is that Ecological economics is rejecting the mainstream. They see the economy as embedded in the biophysical reality while mainstream economics considers nature more or less external to it meaning environmental problems are considered externalities that can be dealt with the right economic instrument or tool.

The theories of thermodynamics Ecological Economies points out that all production processes need resources and energy input and they always produce waste products . This is unavoidable just like our metabolism which is often used for the economy within Ecological Economies so it looks at the economy in terms of flows of resources and energy.

The most interesting part of the lecture, wich is very important to rethinking economics, is the knowledge and examination of the comparison of the different schools of schools of thought in Economics.

Written by: Kiril Nikolov

Based on the lecture "Alternatives to Mainstream Economics" by Tone Smith during the AEMS summer school 2021.