My last blog claimed that equilibrium economics is a fig-leaf for the rich and powerful – because it is a justification for preserving the status quo. But it is more than that, because the conditions required for reaching any such equilibrium (the point at which prices of goods and services have adjusted so that everyone wishing to buy is partnered by someone wishing to sell) are exactly those that are likely to allow those with existing wealth to become richer.

In the theory, this can’t happen, because in equilibrium everybody pays everybody else exactly what is needed for them to provide the good or service desired – no more and no less. Extending this idea a little further, it’s still reasonable that in an economy that is developing new goods and services we might allow a firm to charge us a bit extra on the promise of working on some new and better products. But what if we knew the firm were wanting these extra funds to produce misleading advertising, to bribe officials to cover up evidence of pollution, or to cover the costs of a temporary loss while they push a competitor out of business? We would surely then refuse to pay the prices demanded. Read the rest of this entry »