Where Did Economics Go Wrong? Modern Economics as a Flight from Reality

Critical Review, Vol. 11, No. 1, pp. 11-64, Winter 1997

54 Pages Posted: 17 Jan 2010

See all articles by Peter J. Boettke

Peter J. Boettke

George Mason University - Department of Economics; Mercatus Center at George Mason University

Date Written: 1997

Abstract

F.A. Hayek's realistic economic theory has been replaced by the formalistic use of equilibrium models that bear little resemblance to reality. These models are as serviceable to the right as to the left: they allow the economist either to condemn capitalism for failing to measure up to the model of perfect competition, or to praise capitalism as a utopia of perfect knowledge and rational expectations. Hayek, by contrast, used equilibrium to show that while capitalism is not perfect, it contains error-correcting institutions that bring it closer to perfection than i intuitively apparent.

JEL Classification: B20, B53

Suggested Citation

Boettke, Peter J., Where Did Economics Go Wrong? Modern Economics as a Flight from Reality (1997). Critical Review, Vol. 11, No. 1, pp. 11-64, Winter 1997, Available at SSRN: https://ssrn.com/abstract=1531069

Peter J. Boettke (Contact Author)

George Mason University - Department of Economics ( email )

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Mercatus Center at George Mason University ( email )

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