Neo-classical microeconomic theory, especially in its more recent fundamentalist manifestations, has done immense damage to the real economy while nurturing the parasitic financial sector, as recounted from time to time elsewhere on this site.

Various alternative approaches have identified and addressed problems created by that theory. Welfare economics, the economics of social balance, and what is referred to as behavioural economics, have all sought to modify how the neo-classical maximising model operates. However they have not provided a clear and simple alternative to neo-classical mathematics. So the neo-classical model prevails and will survive all such challenges. Utility maximising economic man and the profit (or shareholder wealth) maximising firm, operating within an assumed to be efficient market, will continue to be accepted as the solution to maximising economic growth and social welfare. The obvious inequity of distribution between rich and poor, both within and between nations, will continue to be regretted as necessary to the utilitarian result. Moreover, it is argued, care for the environment could be more readily financed by a successful economy, rather than by one which is struggling to survive.

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The economic mainstream has flowed on its capital oriented way with relatively little deviation despite its manifest limitations, errors, omissions and downright falsehoods. And despite the occasional disasters to which it gives rise.

In the middle of last century, J M Keynes corrected some of the more apparent errors of the classical model, but his aim was improvement rather than revolution. He did argue powerfully that ‘the madmen in authority’ should accept the maintenance of full employment as their moral responsibility, but renegade he was not.

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A retrospective of this year’s postings would highlight some of the flaws in accepted economic theory. Many have been flagged up elsewhere: economic theory is not, and never has been, without its severe and knowledgeable critics. However, there are a couple of errors which are fundamental to the study of economics which are not often mentioned elsewhere.

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The Revolt was precipitated by the government’s heavy-handed attempts to increase taxes and cut public services, in order to repay the debt which had been incurred by the speculative losses of the bankers, who continued to pay themselves massive bonuses. The government actions affected some of the poor more than others and the wealthy, including the bankers, not at all.

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So far as the recent American elections were concerned, Tomasky may have been right that the free market shareholder primacy ideology was the only big coherent picture then on offer; more socially oriented policies lacked coherence. But the next big theme is in sight and may well shift free market shareholder primacy, with its excesses of greed and self-interest, into the long grass of history. The straws in the wind which suggest such a change are many and various: population growth, resource depletion especially water and oil, climate change, pollution, growing inequality between rich and poor, and above all, the ever widening recognition by ordinary people that finite earth and self-interest maximising man are on course for a massive and decidedly unpleasant collision.

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