I am an economist by professional training, though I don't do "economic" research, I am frequently called upon to use my economic and econometric expertise in my education, acculturation and hardship research. To keep myself up-to-date, I do quite a bit of reading about economics.
Recently there have been several very favorable lay texts about the problems facing economists as questions have been raised about the validity of the neoclassical model. Some of these have significant promise for renewing our understanding of how our economy operates and how it fits into a more holistic view of economy, society and ecology.
The way economics and economists are portrayed in both the corporate and independent media is usually quite negative, for different reasons. The corporate media portrays economists as disagreeing widely on questions regarding predicting the future, an ridiculously unfair characterization. But I suppose they get a laugh out of it. The independent media portrays economists as a monolith, and that we have all bought into the neoclassical model and the view that it solves all problems of allocation through an "all-markets, all-the-time" approach; this is also inherently unfair because none of the economists I know personally accept the neoclassical model as an accurate representation of reality. It does serve useful purposes, but for most of us, generating solutions to our problems of efficiency and equitable allocation is not one of them. Despite the consensus over in Libertopia, the market is simply not capable of solving every problem.
The merging of ecology and economy encouraged by the inconvenient truth of oncoming ecological catastrophe, and the emerging scientific consensus about the role of all economic activity in creating this catastrophe--is but one of many disciplines that has the potential to lead to generalized models that can overtake neoclassical as a more accurate, comprehensive and completely general representation of our socio-economic reality. This charge is lead (in my view) by Bill McKibben. His book Deep Economy has much potential, but is only a start.
Another is caring economics--the notion that we are all products of nurture, or lack thereof, and that our economic rules must be rewritten in order to make sure nurture is rewarded at levels that currently we allocate to "anti-nurture" activities, like warfare, ignorance, and law-breaking, all of which are viewed favorably in American society and rewarded accordingly. Riane Eisler's The Real Wealth of Nations is a great text about caring economics. The beauty of Eisler's text is its complete re-framing of the capitalist-command (communist) economy paradigm: both paradigms are strictly dominator driven: they value the more powerful over the least powerful. Caring economics recognizes that a great deal of potential is lost by not taking every opportunity to nurture those with less power. In other words, the dominator economy, whether it be market or command-driven, never reaches its full potential. In this sense, the caring economics paradigm explains our economy a lot better than the neoclassical. As we have become more and more market driven, and gotten away from a tendency to lend public support to important personal and societal growth endeavors, our economy has faltered.
The bottom line is that if the neoclassical model is not valid--that is, if it does not explain what it purports to explain, which is human socioeconomic decision making about the allocation of resources--then a new model is needed. The neoclassical model probably accurately explains something--some market representing a thin slice of our socio-economy--and its generalizations about decision making may very well fit a similarly thin slice of the people in our economy. Let's say for argument's sake, that it explains the market activities of your average stock day-trader. I may be able to accept that, as a day-trader seems to fit many of the assumptions of perfection that neoclassical economics demands: day-traders strictly optimize, they enter into transactions with perfect information and rationality. Is this sufficiently general enough?
But neoclassical does not seem to accurately explain why, if we cut taxes, the gap in income and wealth widens ever greater. It has a completely different view on the outcome of cutting taxes: if you cut taxes, economic activity will be enhanced, and more wealth will eventually "trickle down" to the masses. We're still basically waiting for this to happen, I think.
Neoclassical does not have a lot to say about the problem of the ecological catastrophe of global warming. Well, some years ago, some smart economists took a crowbar, pried open the neoclassical model just a little, and forced concepts called "public goods" and "externalities" into it. Pollution is essentially both: it is an indirect product of market activity (externality) and its cleanup, being valued by the many is indivisible as a benefit (public good). Yet in the neoclassical, these concepts are treated as flaws of the market, and discrete conditions at that. In other words, something is a public good, or it is not.
Instead, wouldn't we be better served if a "new economics" treated all goods as part public and part private? Instead of a flaw, it's inherent. If we look at any market activity, that seems to be the case, anyway. Completely private activity a decade ago is having significant public effect today: someone got in the car and took a family vacation in 1998, and the carbon that was pumped into the atmosphere, and combined with all the carbon pumped into the atmosphere over time, is causing the arctic cap to melt.
I envision a new economics whereby a market consists of multiple dimensions; two of these dimensions would capture the good's public nature and part its private nature. By treating them as two separate dimensions, we avoid the fallacy of the zero-sum: that a good considered x% public, must thus be 1-x% private. I see no reason why a good cannot possess, synergistically, a high percentage of the qualities of a private good and a high percentage of the qualities of a public good.
Just an idea, and not a well-thought-out one at that. Nevertheless, the neoclassical model must be treated with the proper respect and kept at the proper distance. I for one, would like to see introductory economics classes teach it with the proper dispassion, as we did at Carolina: teach freshmen the neoclassical, but take it apart: ask them to evaluate the assumptions and question the findings. Taking this one step further, we should introduce new, cutting-edge views on economics, and these views should not come only from within the discipline of economics. Sociologists and anthropologists have developed promising theories of human behavior that represent opportunities for a convergence.