eThesis - School of Business electronic theses

Abstract:

After the financial crisis of 2008 the discipline of economics has come under a torrent of criticism - both from within and outside the profession. Alongside bankers and regulators, economists have been singled out as the culprits of the crisis. Among other things, critics claim that economists were lost in their own theoretical constructs and pushed unrealistic intellectual frameworks which abstracted away important characteristics of the economy and allowed risks to build up within the financial system.

The idea of the thesis is to provide a comprehensive literature review of the main strands of criticism of mainstream economics, especially the current discussion. My aim is to contribute by bringing together different views of notable members of the academic community and building a composite of their views. I present the key problems and how economists have responded to them. This thesis traces these alleged failures of economics by employing the Model Representation framework developed by Mäki (2012).

The study surveys the general discussion and then focuses on the areas which can be considered as most problematic:

I) The use of false idealizing assumptions in modelling

II) The behavior of economists themselves, due to human nature and incentives present in the academic system.

These issues seem to stem from economists' desire to have their work seen as scientific - similar to natural sciences - and from the competitive dynamics within the economics profession. This thesis shows that these problems have been present in economics for a long time and that there is inadequate dialogue about them within the profession.