Skip to main content
SpringerLink
Log in

Africa Should Discard Mainstream Economic Theory

  • Chapter
  • First Online:
The Palgrave Handbook of Africa’s Economic Sectors

  • 689 Accesses

Abstract

Economists in developing countries should abandon the ideas enshrined in the Washington consensus, and resist teaching mainstream economic theory, because the idealized markets of mainstream economic theory differ greatly from real markets in ways that disadvantages those who are at the lower end of the global income distribution. The inconvenient truth is that real markets have numerous Achilles heels that prevent them working as described within the neoliberal framework. Real markets reduce the chances of those born into poverty to succeed in today’s complex global economy. These intrinsic imperfections, generally overlooked or trivialized by mainstream economists, are discussed in this essay. They include such factors as the costs associated with acquiring reliable information about market conditions, the myriad of problems associated with bounded rationality, manipulation of utility function of market participants.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 109.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 139.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 199.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Similar content being viewed by others

References

  • Akbar, Prottoy, Sijie Li, Allsion Shertzer, and Randall P. Walsh. 2019. “Racial Segregation in Housing Markets and the Erosion of Black Wealth,” NBER Working Paper No. 25805, May.

    Google Scholar 

  • Akerlof, George. 1970. “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism,” Quarterly Journal of Economics 84 (August): 488–450.

    Google Scholar 

  • Akerlof, George. 2002. “Behavioral Macroeconomics and Macroeconomic Behavior,” American Economic Review 92 (3): 411–433.

    Article  Google Scholar 

  • Akerlof, George, and Rachel Kranton. 2010. Identity Economics. How Our Identities Shape Our Work, Wages, and Well-Being (Princeton: Princeton University Press).

    Book  Google Scholar 

  • Akerlof, George, and Robert Shiller. 2015. Phishing for Phools: The Economics of Manipulation and Deception (Princeton, NJ: Princeton University Press).

    Book  Google Scholar 

  • Arrow, Kenneth. 1963. “Uncertainty and the Welfare Economics of Medical Care,” American Economic Review 53 (5): 141–149.

    Google Scholar 

  • Arrow, Kenneth J. 1978. “A Cautious Case for Socialism,” Dissent Magazine (Fall): 472–480. https://www.dissentmagazine.org/wp-content/files_mf/1426269747ACautiousCaseforSocialism.pdf, accessed May 6, 2019.

  • Board of Governors of the Federal Reserve System. 2018. “Report on the Economic Well-Being of U.S. Households in 2017.”

    Google Scholar 

  • Bowles, Samuel. 2016. The Moral Economy: Why Good Incentives Are No Substitute for Good Citizens (New Haven: Yale University Press).

    Google Scholar 

  • Brody, Kristen E., and Aisha G. Meeks. 2015. “Obesity and Social Inequality in America,” The Review of Black Political Economy 42 (3): 201–209.

    Google Scholar 

  • Camerer, Colin F. 2008. “Behavioural Game Theory,” in The New Palgrave Dictionary of Economics, 2nd ed., ed. Steven N. Durlauf and Lawrence E. Blume (Basingstoke, UK: Palgrave Macmillan), pp. 42–50.

    Google Scholar 

  • Chetty, Raj and Nathaniel Hendren. 2018. “The Effects of Neighborhoods on Intergenerational Mobility I: Childhod Exposure Effects,” Quarterly Journal of Economics 133 (3): 1107–1162.

    Article  Google Scholar 

  • Chetty, Raj, Nathaniel Hendren, Maggie R. Jones, and Sonya R. Porter. 2018. “Race and Economic Opportunity in the United States: An Intergenerational Perspective,” National Bureau of Economic Research Working Paper No. 24441, March.

    Google Scholar 

  • Chiteji, N., and Darrick Hamilton. 2002. “Family Connections and the Black-White Wealth Gap Among Middle-Class Families,” The Review of Black Political Economy 30 (1): 9–28.

    Article  Google Scholar 

  • CDC, Centers for Disease Control and Prevention, National Center for Health Statistics, Table 015. 2017. “Life Expectancy at Birth,… by Sex, Race, and Hispanic Origin: United States, Selected Years 1900–2016.” https://www.cdc.gov/nchs/hus/contents2017.htm#015, accessed March 23, 2019.

  • Coase, Ronald. 1988. The Firm, The Market, and the Law (Chicago, IL: The University of Chicago Press).

    Google Scholar 

  • Conlisk, John. 1996. “Why Bounded Rationality?” Journal of Economic Literature 34 (2): 669–700.

    Google Scholar 

  • Daly, Mary, Bart Hobijn, and Joseph Pedtke. 2017. “Disappointing Facts about the Black-White Wage Gap,” Federal Reserve Bank of San Francisco Economic Letters, September 5.

    Google Scholar 

  • Darity, William, Jr., and Patrick Mason. 1998. “Evidence on Discrimination in Employment: Codes of Color, Codes of Gender,” Journal of Economic Perspectives 12 (2): 63–90.

    Google Scholar 

  • Darity, William, Jr., and Darrick Hamilton. 2012. “Bold Policies for Economic Justice,” The Review of Black Political Economy 39 (1): 79–85.

    Article  Google Scholar 

  • Darity, William, Jr., and Darrick Hamilton. 2018. “The Federal Job Guarantee,” Intereconomics: Review of European Economic Policy 53 (3, May): 179–180.

    Google Scholar 

  • Davis, Carlton G. 1994. “Domestic Food Programs, Hungar and Undernutrition in Rural America: How Secure Is the Safety Net?” The Review of Black Political Economy 22 (4): 179–202.

    Article  Google Scholar 

  • Deaton, Angus. 2008. “Income, Health, and Well-Being Around the World: Evidence from the Gallup World Poll,” Journal of Economic Perspectives 22 (2): 53–72, p. 68.

    Google Scholar 

  • Editorial Board. 2018. “Predatory Colleges, Freed to Fleece Students,” The New York Times, May 28.

    Google Scholar 

  • EPI, Economic Policy Institute. 2020. “Underemployment by Race.” https://www.epi.org/data/#/?subject=underemp&r=*&e=*, accessed April 28, 2020.

  • Feldstein, Martin. 2016a. “The U.S. Economy is in Good Shape,” Wall Street Journal, February 21.

    Google Scholar 

  • Feldstein, Martin. 2016b. “Dealing with Long-Term Deficits,” American Economic Review: Papers & Proceedings 106 (5): 35–38.

    Article  Google Scholar 

  • Fontenot, Kayla, Jessica Semega, and Melissa Kollar. 2018. “Income and Poverty in the United States: 2017,” Current Population Reports, U.S. Census Bureau, September. https://www.census.gov/content/dam/Census/library/publications/2018/demo/p60-263.pdf, accessed March 23, 2018.

  • Friedman, Gerald. 2018. Microeconomics: Individual Choice in Communities (4th edition, Dubuque, IA: Kendall Hunt Publishing).

    Google Scholar 

  • Goodwin, Neva, Jonathan M. Harris, Julie A. Nelson, Brian Roach, and Mariano Torras. 2014. Principles of Economics in Context (2nd edition, Abingdon, UK: Routledge).

    Google Scholar 

  • Hales, Craig M., Margaret D. Carroll, Cheryl D. Fryar, and Ogden Cynthia. 2017. “Prevalence of Obesity Among Adults and Youth: United States, 2015–2016,” NCHS Data Brief, No. 288, October.

    Google Scholar 

  • Hamilton, Darrick. 2017. “The Moral Burden on Economist: National Economic Association Presidential Address,” Institute of New Economic Thinking Blog April 13. https://www.ineteconomics.org/perspectives/blog/the-moral-burden-on-economists.

  • Hamilton, Darrick, and William Darity, Jr. 2010. “Can ‘Baby Bonds’ Eliminate the Racial Wealth Gap in PutativePost-Racial America?” The Review of Black Political Economy 37 (3): 207–216.

    Google Scholar 

  • Hamilton, Darrick, and Darity, William Jr. 2017. “The Political Economy of Education, Financial Literacy, and the Racial Wealth Gap,” Review, Federal Reserve Bank of St. Louis 99 (1): 59–76.

    Google Scholar 

  • Hill, Rod and Anthony Myatt. 2010. The Economics Anti-Textbook. A Critical Thinker’s Guide to Microeconomics (New York: Zed Books).

    Google Scholar 

  • Kahneman, Daniel. 2003. “Maps of Bounded Rationality: Psychology for Behavioral Economics,” American Economic Review 93 (5): 1449–1475.

    Article  Google Scholar 

  • Keynes, John Maynard. 1926. The End of Laissez-Faire: The Economic Consequences of the Peace (London: Hogarth Press).

    Google Scholar 

  • Keynes, John Maynard. 1936. The General Theory of Employment, Interest and Money (London: Macmillan).

    Google Scholar 

  • Komlos, John. 2015. “Income Inequality Begins at Birth and These Are the Stats that Prove It,” PBS Newshour, May 4. www.pbs.org/newshour/making-sense/plight-african-americans-u-s-2015/, accessed March 26, 2019.

  • Komlos, John. 2016a. “Another Road to Serfdom,” Challenge: The Magazine of Economic Affairs, 59 (6): 491–518.

    Google Scholar 

  • Komlos, John. 2016b. “Growth of Income and Welfare in the U.S., 1979–2011,” NBER Working Paper No. 22211.

    Google Scholar 

  • Komlos, John. 2017. “The Triumph of Trumpism,” Journal of Contextual Economics, Schmollers Jahrbuch, 137 (4): 421–440.

    Article  Google Scholar 

  • Komlos, John. 2019a. Fundamentals of Real-World Economics: What Every Economics Student Needs to Know (2nd edition, Abingdon, UK: Routledge).

    Google Scholar 

  • Komlos, John. 2019b. “Reaganomics: A Watershed Moment on the Road to Trumpism,” The Economists’ Voice. https://doi.org/10.1515/ev-2018-0032.

  • Krugman, Paul, and Robin Wells. 2013. Economics (3rd edition, New York: Worth Publishers).

    Google Scholar 

  • Linder, Staffan. 1970. The Harried Leisure Class (New York: Columbia University Press).

    Google Scholar 

  • Madrick, Jeffrey. 2015. Seven Bad Ideas: How Mainstream Economists Have Damaged America and the World (New York: Vintage).

    Google Scholar 

  • Mankiw, Gregory N. 2018. Principles of Economics (8th edition, Boston: Cengage Learning).

    Google Scholar 

  • McArdle, Nancy, Theresa Osypuk, and Dolores Acevedo-Garcia. 2007. “Disparities in Neighborhood Poverty of Poor Black and White Children,” Diversity Data Briefs 1. http://diversitydata.org/Publications/brief7.pdf, accessed March 24, 2019.

  • Movieguide, no date. “Study: Poverty and High Rates of TV Viewing Are Linked.” https://www.movieguide.org/news-articles/study-poverty-and-high-rates-of-tv-viewing-are-linked.html.

  • Myers, David. 2010. Social Psychology (10th edition, New York: McGraw-Hill).

    Google Scholar 

  • NAACP. “Criminal Justice Fact Sheet.” https://www.naacp.org/criminal-justice-fact-sheet/, accessed March 28, 2019.

  • Rodgers, William M., and John Holmes. 2004. “New Estimates of Within Occupation African American-White Wage Gaps,” The Review of Black Political Economy 31 (4): 69–88.

    Article  Google Scholar 

  • Samuelson, Paul, and William Nordhaus. 2009. Economics (19th edition, McGraw-Hill).

    Google Scholar 

  • Samuelson, Robert J. 2019. “It’s Time We Tear Up Our Economics Textbooks and Start Over,” The Washington Post, June 23.

    Google Scholar 

  • Sberlati, Jessica. 2007. “Countrywide Commercial 3,” YouTube, October 26. https://www.youtube.com/watch?v=Ei5OrV-CmHg, accessed April 4, 2019.

  • Schneider, Geoffrey. 2019. Microeconomic Principles and Problems: A Pluralist Introduction (Abingdon, UK: Routledge).

    Google Scholar 

  • Simon, Herbert A. 1955. “A Behavioral Model of Rational Choice,” Quarterly Journal of Economics 69: 99–118.

    Google Scholar 

  • Simon, Herbert A. 1982. Models of Bounded Rationality (Cambridge, MA: MIT Press).

    Google Scholar 

  • Simms, Margaret C. 1985. “Black Women Who Head Families: An Economic Struggle,” The Review of Black Political Economy 14 (2–3): 141–151.

    Article  Google Scholar 

  • Streufert, Peter, 2000. “The Effect of Underclass Social Isolation on Schooling Choice,” Journal of Public Economic Theory 2 (4): 461–482.

    Article  Google Scholar 

  • Stiglitz, Joseph. 2002. “There Is No Invisible Hand,” The Guardian, December 20.

    Google Scholar 

  • Stiglitz, Joseph. 2009. Selected Works of Joseph E. Stiglitz, Volume One: Information and Economic Analysis (Oxford University Press).

    Google Scholar 

  • Stiglitz, Joseph. 2018. “When Shall We Overcome,” Project Syndicate, March 12.

    Google Scholar 

  • Stiglitz, Joseph and Bruce C. Greenwald. 1986. “Externalities in Economies with Imperfect Information and Incomplete Markets,” Quarterly Journal of Economics 101 (2): 229–264.

    Article  Google Scholar 

  • St. Louis Federal Reserve Bank, series UNRATE and LNS14000006, 2019.

    Google Scholar 

  • Tabibnia, Golnaz, and Matthew D. Lieberman. 2007. “Fairness and Cooperation Are Rewarding: Evidence from Social Cognitive Neuroscience,” Annals of the New York Academy of Sciences 1118: 90–101.

    Google Scholar 

  • Thaler, Richard. 2016a. Misbehaving: The Making of Behavioral Economics (New York: W.W. Norton & Co.).

    Google Scholar 

  • Thaler, Richard. 2016b. “Behavioral Economics: Past, Present, and Future,” American Economic Review 106 (7): 1577–1600.

    Article  Google Scholar 

  • The New School. “Robert Shiller on How Human Psychology Drives the Economy, the New School,” YouTube Video, uploaded July 16, 2009; @11.29 minutes. https://www.youtube.com/watch?v=8RrKScRg5KM&t=8s, accessed March 23, 2019.

  • Wallace, Mike. “Interview. Guest: Aldous Huxley,” May 18, 1958, http://www.hrc.utexas.edu/multimedia/video/2008/wallace/huxley_aldous_t.html, accessed March 24. 2019; transcript is at: www.cuttingthroughthematrix.com/articles/Mike_Wallace_interviews_Aldous_Huxley_May_18_1958.html.

  • Waters, Mary and Karl Eschbach. 1995. “Immigration and Ethnic and Racial Inequality in the United States,” Annual Review of Sociology 21: 419–446.

    Article  Google Scholar 

  • WHO, World Health Organization. “World Health Statistics 2016, Annex B,” http://www.who.int/gho/publications/world_health_statistics/2016/Annex_B/en/, accessed March 18, 2019.

  • Williams, Robert B. 2017. “Wealth Privilege and the Racial Wealth Gap: A Case Study in Economic Stratification,” The Review of Black Political Economy 44 (3): 303–325.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. University of Munich, Munich, Germany

    John Komlos

Authors
  1. John Komlos
    View author publications

    You can also search for this author in PubMed Google Scholar

Editor information

Editors and Affiliations

  1. Department of Economics, Pennsylvania State University DuBois, DuBois, PA, USA

    Evelyn F. Wamboye

  2. Department of Economics and Finance, Middle Tennessee State University, Murfeesboro, TN, USA

    Bichaka Fayissa

Rights and permissions

Reprints and permissions

Copyright information

© 2022 The Author(s), under exclusive license to Springer Nature Switzerland AG

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Komlos, J. (2022). Africa Should Discard Mainstream Economic Theory. In: Wamboye, E.F., Fayissa, B. (eds) The Palgrave Handbook of Africa’s Economic Sectors. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-75556-0_39

Download citation

  • DOI: https://doi.org/10.1007/978-3-030-75556-0_39

  • Published:

  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-030-75555-3

  • Online ISBN: 978-3-030-75556-0

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

Publish with us

Policies and ethics

Search

Navigation