Blog-Reference
Editor quotes Stuart Birks’s critique: “Note that the supply and demand model is, like much of economics, based on static analysis. Consequently, the focus will be on the market equilibrium. It is based on the idea that you have a scenario within which you can have as much costless adjustment as required to achieve some final end state which will be the equilibrium (issues of existence and uniqueness aside). This does not reflect the real world. In reality, there is a starting point, A. This is more than just an initial resource endowment. It also specifies an application of those resources, for example producing and consuming goods and services at some rate of output (as we are actually moving through time). There is also a path to be taken to the endpoint.”
This critique is absolutely correct. Economists think they can answer any question by painting the triad SS-function―DD-function―equilibrium. Leijonhufvud called this analytical tool Totem of the Micro/Totem of the Macro. What the representative economist does not understand to this day is that there is NO such thing as an economic equilibrium and NO such thing as SS and DD functions. The Totem of Micro/Macro is a NONENTITY like the Tooth Fairy or the Easter Bunny.
While traditional Heterodoxy has correctly identified the core of every economic textbook as proto-scientific garbage it has failed to provide the methodologically correct replacement of the methodologically unacceptable supply-demand-equilibrium construct. This is the methodological imperative: "The problem is not just to say that something might be wrong, but to replace it by something — and that is not so easy." (Feynman) In other words, traditional Heterodoxy failed at its mission to bring about the necessary Paradigm Shift.
The Paradigm Shift has been accomplished by Constructive Heterodoxy, see
► Essentials of Constructive Heterodoxy: The Market
► The Law of Supply and Demand: Here It Is Finally
► How to Get Rid of Supply-Demand-Equilibrium
What both orthodox and heterodox economists in their innate scientific incompetence have failed to realize is that the economy as a system is defined by the interrelationship of a number of elementary variables. Every model, no matter how differentiated, must contain these objective SYSTEMIC interrelationships as its formal hardcore. This is an imperative methodological necessity.
The false Walrasian microfoundations and the false Keynesian macrofoundations have to be replaced with the true macrofoundations. The graphical representation of this absolute formal minimum is given on Wikimedia AXEC31:
This chart replaces the hare-brained Totem of SS-function―DD-function―equilibrium. A detailed description of the elementary macro relationships has been given in the papers referenced above.
It is time now for traditional Heterodoxy, which has exhausted itself in repetitive critique, to get out of the way and no longer hamper Constructive Heterodoxy.
Egmont Kakarot-Handtke
For details of the big picture see cross-references Paradigm Shift.
For more about Heterodoxy see AXECquery.
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Wikimedia AXEC121i
