3 Ways To Think About Economics

From The Virtues and Vices of Equilibrium and the Future of Financial Economics, Geanakoplos and Farmer 08, SSRN:

Equilibrium theory focuses on individual actions and individual choices. By contrast Marx emphasized class struggles, without asking whether each individual in a class would have the incentive to carry on the struggle. Similarly Keynesian macroeconomics often posited reduced form relationships, such as the positive correlation between unemployment and inflation (called the Phillips curve), without deriving them from individual actions. Equilibrium theory is an agent based approach which does not admit any variables except those that can be explained in terms of individual choices.


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