Four Building Blocks of Economic Theory

Economics is not sociology, psychology or politics, but it relies on assumptions about society, mental and emotional processes, and the political and legal environment. Until recently, however, these assumptions didn’t come from the other disciplines which take them as their fields of study; instead, they were largely inherited from the eighteenth century worldview out of which Adam Smith and his followers fashioned their early renditions of economic theory. That is to say, they reflected the prejudices of the Enlightenment in England around the time of the American revolution. They are rationalist, individualist and concerned with subduing nature for the greater benefit of civilization. In this chapter we will look carefully at several of the most important conceptual building blocks, explaining exactly how they appear in modern economics and subjecting them to critical scrutiny.