Document file:///D|/Export1/www.netlibrary.com/nlreader/nlreader.dll ...

Document
insights, like the insulation of managers from stockholders, turned out to be fragile observations that
ceased to be true almost as soon as he made them. It is, of course, true that corporate managers do not
always act in the interests of stockholders; but to the extent we have made any progress in thinking
about that fact, it is through hard thinking about the principal-agent problem which is simply an
elaboration of the basic economistic emphasis on self-interested behavior.
In other words, Homo economicus is an implausible caricature, but a highly productive one, and no
useful alternative has yet been found.
Page 78
It is also the case that many of those who criticize mainstream economics for its narrowness don't
understand what the field is or can do. At the crudest level, they simply have no idea what economics is
about: Jay Forrester, founder of system dynamics, once replied to an economist who criticized his work
by asserting that "Nordhaus, like all economists, only thinks in terms of one-way causation he doesn't
understand that variables may simultaneously affect each other." At a higher level, the idea of
emergence is lost on most people who have not studied economics; the idea that markets can sometimes
be a decentralized way of achieving efficient outcomes is seen as a sort of blind prejudice, not the deep
insight about emergent properties that it is. At the most sophisticated level, critics think that perfect
competition and perfect markets are all that economics can do.
I've already tried to describe how it is possible to use the basic self-interest-plus-interaction method of
economics to make sense of seemingly heterodox ideas in development and geography; I'll want to talk
more about the implications of that work shortly. But let me first ask why, despite
file:///D|/Export2/www.netlibrary.com/nlreader/nlreader.dll@bookid=409&filename=page_78.html [4/18/2007 10:30:34 AM]