If this Wikipedia article accurately reflects what passes for microeconomics these days, the field hasn’t advanced since I took my first micro course almost 60 years ago. And my first micro course was based on Alfred Marshall’s Principles of Economics, first published in 1890.
What’s wrong with micro as it’s taught today, and as it has been taught for the better part of 126 years? It’s not the principles themselves, which are eminently sensible and empirically valid: Supply curves slope upward, demand curves slope downward, competition yields lower prices, etc. What’s wrong is the heavy reliance on two-dimensional graphical representations of the key variables and their interactions; for example, how utility functions (which are gross abstractions) generate demand curves, and how cost functions generate supply curves.
The cautionary words of Marshall and his many successors about the transitory nature of such variables is no match for the vivid, and static, images imprinted in the memories of the millions of students who took introductory microeconomics as undergraduates. Most of them took no additional courses in micro, and probably just an introductory course in macroeconomics — equally misleading.
Micro, as it is taught now, seems to purvey the same fallacy as it did when Marshall’s text was au courant. The fallacy, which is embedded in the easy-to-understand-and remember graphs of supply and demand under various competitive conditions, is the apparent rigidity of those conditions. Professional economists (or some of them, at least) understand that economic conditions are fluid, especially in the absence of government regulation. But the typical student will remember the graph that depicts the dire results of a monopolistic market and take it as a writ for government intervention; for example:
Power that controls the economy should be in the hands of elected representatives of the people, not in the hands of an industrial oligarchy.
William O. Douglas
(dissent in U.S. v. Columbia Steel Co.)
Quite the opposite is true, as I argue at length in this post. Douglas, unfortunately, served on the Supreme Court from 1939 to 1975. He majored in English and economics, and presumably had more than one course in economics. But he was an undergraduate in the waning days of the anti-business, pro-regulation Progressive Era. So he probably never got past the simplistic idea of “monopoly bad, trust-busting good.”
If only the Supreme Court (and government generally) had been blessed with men like Maxwell Anderson, who wrote this:
When a government takes over a people’s economic life, it becomes absolute, and when it has become absolute, it destroys the arts, the minds, the liberties, and the meaning of the people it governs. It is not an accident that Germany, the first paternalistic state of modern Europe, was seized by an uncontrollable dictator who brought on the second world war; not an accident that Russia, adopting a centrally administered economy for humanitarian reasons, has arrived at a tyranny bloodier and more absolute than that of the Czars. And if England does not turn back soon, she will go this same way. Men who are fed by their government will soon be driven down to the status of slaves or cattle.
And it’s happening here, too.