Frequent Student Problems with Microeconomics
Students of microeconomics are in serious trouble. A large number of the theories they are taught seem intuitively wrong. Quite often student scepticism does not lend itself easily to precision. Nor is it easily dispelled by the authority wielded by instructors or famous textbook authors.
The statements below reflect frequent difficulties and stumbling blocks experienced by students as well as the doubts harboured by students about the validity, scientific nature and relevance of microeconomic theory. How many of these statements apply to you? How often do you nod when reading the following sentences?
- You wonder why economists claim that profit maximisers regularly end up without profits.
- You do not understand why economists insist that unit costs rise as output is expanded.
- You doubt that managers have ever heard of the least-cost rule or isoquant analysis.
- You wonder why a company's fixed costs are equated with sunk costs.
- You fail to understand how economists manage to postulate that aggregating horizontal demand curves of individual firms leads to a downwards sloping demand curve for the entire industry.
- You fail to see that an individual has a demand curve for washing machines.
- You are surprised that consumers are supposed to be indifferent about the contents of the commodity bundles they buy.
- You do not believe that the behaviour of economic agents is described adequately by assuming that they are rational, selfish maximisers of utility whose preferences are givens and are reliably revealed by their choices.
- You have doubts about the freedom of contract on labour markets.
- You fail to see what Ricardo's comparative advantage has to do with real-world exports and imports.
- You have difficulty in accepting that general-equilibrium theory requires the existence of a central planner.
- You have doubts whether maximum welfare and economic efficiency are rightly identified with maximum output.
- You wonder why the micro model is based on the small perfectly competitive firm, which has hardly any equivalent in real-world economies.
Sounds familiar? Then this is the book for you. Its Crash Course explains the arguments that economists put forward in favour of their theories. The Critique explains why many of these arguments are illogical, inconsistent or faulty. The References and Further Reading sections show that eminent mainstream economists harbour very much the same doubts as students and that they have developed convincing theories to challenge the validity of standard micro teaching.
It is also the book for you
- if you are afraid of outing yourself as a dummy or crackpot by asking questions
- if you are disappointed by your instructor's standard answers such as "It's only a model" and "As-if assumptions are legitimate in model-building"
- if you like your required textbook but feel it has a certain Teflon effect and all its glamour and wealth of case studies cannot conceal a fuzziness of substance
- if you are fascinated by the rigour of microeconomics but also harbour increasing doubts about the scientific nature of its underlying assumptions
- if you are really interested in learning how to analyse the economy instead of cramming rather irrelevant theories for your exam
- if you are concerned about the world and think that economists should make a contribution to solving the world's most blatant economic problems.
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