Essay on Toward New Pradigim
Towards A New Paradigm for Economics
International Institute of Islamic Economics
International Islamic University
Abstract. Current economic theory is mainly concerned with the factors which affect the wealth of nations. Issues of income distribution and elimination of poverty and deprivation is secondary. The present paper invites discussion on a new paradigm: hunger and homelessness to make the subject of economics really serve the humankind.
1. Focus of Conventional Economics is Wealth and not Poverty
Current Economic theory is firmly set in the mold structured by Adam Smith 1904). His concern was to look into factors which affect the wealth (and hence …show more content…
Numerous attacks have been mounted on the neoclassical paradigm. On the empirical side, it appears that people rarely behave “rationally,” when rationality is defined in the neoclassical sense. A prominent challenger on this side has been Herbert Simons (1982), who developed the concept of “bounded rationality.” Studies of decision making by psychologists show systematic deviations from neoclassical rationality, as documented by Kahneman, and Tversky (1985), etc. Applied studies of consumer behavior show systematic flaws in the utility model, the main ones being the relative instability of consumer preferences, and the effects of information/misinformation. In econometric studies, systems of demand equations based on utilities can be constructed