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Customer Review

on July 7, 2007
Coyle's thesis is that general equilibrium/neoclassical economics peaked in economics departments around 1985. At that point, economists realized that they had reached the end of the line with neoclassical theory and began to develop more interesting and useful approaches to their field. Thus, thinkers who criticize economic theory as unrealistic really are criticizing a "caricature" of economics that economists themselves already have abandoned.

I am not convinced by her argument, but she does provide an excellent overview of much of the recent work in economics. She talks about endogenous growth theory, game theory, "information" economics, behavioral economics, new institutional economics, and efforts to develop more realistic psychological models of economic behavior. Although she has a Ph.D. in economics, her prose is clear and accessible. She usually gets to the heart of the matter and tries to be fair to both sides of an argument.

She does convince me that economists have done some interesting things in the last twenty years. But she doesn't convince me that economists have abandoned neoclassical orthodoxy. She admits that almost all introductory classes in economics still teach neoclassical equilibrium theory and that students are not exposed to the new stuff until they get into advanced graduate studies. This suggests that the new ideas that Coyle discusses haven't given economists themselves much reason to doubt the value of neoclassical theory. They still see it as a solid foundation for learning economics and understanding economic behavior. To most economists, the new ideas that Coyle discusses seem to be additional stories to add to the existing foundation rather than a fundamental challenge to existing theories.

That is the basic question that Coyle fails to address directly. Should the various challenges to neoclassical equilibrium theory radically alter the way that economists think about the economy? I would assert that the neoclassical emphasis on rigor and mathematics lends a false sense of precision and universality to their theories. Really, the economy is a complex phenomenon and those who study it are confronted by the same ambiguities and limitations faced by other human sciences such as sociology and history.
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