Conclusion: the economy we live in

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Chapter 8 in The Behavioral Economics of John Maynard Keynes, 2022, pp 149-153 from Edward Elgar Publishing

Abstract: The book concludes with a plea for an economic theory that aligns with the economy we live in and is not in contradiction with actual human behavior. This is the approach of real science as opposed to the axiomatic method. Economic theory determines our imagination of what we regard as reasonable goals, and overly narrow, abstract assumptions may mislead economic policy. Keynes' microeconomic reasoning is the basis for his macroeconomic conclusions, but since they deviate from the neoclassical axioms (maximization and equilibrium), they were discarded as intellectually flawed and lay-person economics. Nevertheless, Keynes' microfoundations are impressively substantiated by rigorous research in Behavioral Economics and neurology. Economic policy based on overly abstract economic models out of touch with the economy we live in may be misleading and extremely costly.

Keywords: Economics and Finance (search for similar items in EconPapers)
Date: 2022
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