Why Doesn’t “Regular” Economics Work?

The mainstream economics most of us learned in school is known as neoclassical economics, and it quite simply doesn’t explain human behavior. It’s all built on the 100% rational economic man – homo economicus. And well, people are regularly observed to be irrational/emotional.┬áThe recent surge in popularity of Behavioral Economics came about to fill the gap. It’s done a great job… but it hasn’t gone far enough.

Mainstream economics and traditional behavioral economics both model decisions based on single period time horizons and reactionary response to random outcomes. That’s not even close to reality, as you know.

Real world decisions require upfront effort – money, exertion or whatever. That is certain. They also require time for benefits to result, and those results are not always fully certain. Think of losing weight, making investments, building a business etc., pursuing a desired mate etc. etc. All of these real world decisions we make cover multiple periods, involve upfront costs and produce subsequent benefits… we hope. Causal Economics is a new branch of Causal Economics that is structured to model these real decisions.

Keep these simple principles in mind and you don’t have to go over all of the math :). But if you do want to see that, visit our foundational article published on ScienceDirect. Let us know what you think and how you’ve applied Causal Economics.

 

 

 

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