FEATURES OF MAINSTREAM ECONOMICS
Mainstream economics refers to the orthodox or neoclassical tradition of economics, in
which markets are moved by an invisible hand and all actors are rational. Mainstream
economics uses a set of assumptions including rationality, perfect competition, flexible prices
and equilibrating markets. The mainstream economics is so called because it forms a major part
of undergraduate and postgraduate studies in Economics and also majority of economic
research follows its methodology.
Mainstream economics tries to make the subject of Economics a pure science of resource
allocation, given limited resources and unlimited human wants. The seed of mainstream
economics is seen in Adam Smith thoughts and later on Alfred Marshall developed it into a
more formal discipline. Originally, mainstream economics used deduction as a main method for
theorisation. With the introduction of Econometrics and its wide growth, Economics has
become more empirical after 1950s.
1.Assumption of Rationality
Mainstream Economics assumes that individuals are rational and they try to maximise their
satisfaction, given the set of available choices and constraints. A rational consumer maximises
his utility given the income, rational producer maximises profit given the prices and costs, so on
and so forth. Mainstream Economics is thus analysing the behaviour of ‘Homoeconomicus’ who
lives to maximise pleasure and minimise pain. Mainstream Economics may be considered to be
within a ‘pleasure-pain calculus’.
2. Methodological Individualism
Mainstream Economics considers individual economic behaviour by assuming that the
individual is not affected by the society, institutions and culture within which she/he lives. Thus,
mainstream economics tries to formulate universal economic laws applicable to all timespace
combinations with out reference to the specific institutional and socio-cultural contexts.
3. Market centrism
Mainstream economics has placed market at the centre of human interactions. It considers
markets as autonomous and omnipotent, capable of self-correction and a perfect mechanism
for optimum resource allocation. Human beings are treated as economic agents who live to
maximise net gains from exchanges in the market.
4. Perfectly Competitive Markets
Mainstream economics assumes that perfect competition prevails in product and factor
markets. Perfect competition requires perfect information, large number of buyers and sellers,
no government intervention, firms as price takers, homogeneous products, etc.
5. Faith in Equilibrium
Mainstream economics believes that markets will always be in equilibrium due to the operation
Mainstream economics refers to the orthodox or neoclassical tradition of economics, in
which markets are moved by an invisible hand and all actors are rational. Mainstream
economics uses a set of assumptions including rationality, perfect competition, flexible prices
and equilibrating markets. The mainstream economics is so called because it forms a major part
of undergraduate and postgraduate studies in Economics and also majority of economic
research follows its methodology.
Mainstream economics tries to make the subject of Economics a pure science of resource
allocation, given limited resources and unlimited human wants. The seed of mainstream
economics is seen in Adam Smith thoughts and later on Alfred Marshall developed it into a
more formal discipline. Originally, mainstream economics used deduction as a main method for
theorisation. With the introduction of Econometrics and its wide growth, Economics has
become more empirical after 1950s.
1.Assumption of Rationality
Mainstream Economics assumes that individuals are rational and they try to maximise their
satisfaction, given the set of available choices and constraints. A rational consumer maximises
his utility given the income, rational producer maximises profit given the prices and costs, so on
and so forth. Mainstream Economics is thus analysing the behaviour of ‘Homoeconomicus’ who
lives to maximise pleasure and minimise pain. Mainstream Economics may be considered to be
within a ‘pleasure-pain calculus’.
2. Methodological Individualism
Mainstream Economics considers individual economic behaviour by assuming that the
individual is not affected by the society, institutions and culture within which she/he lives. Thus,
mainstream economics tries to formulate universal economic laws applicable to all timespace
combinations with out reference to the specific institutional and socio-cultural contexts.
3. Market centrism
Mainstream economics has placed market at the centre of human interactions. It considers
markets as autonomous and omnipotent, capable of self-correction and a perfect mechanism
for optimum resource allocation. Human beings are treated as economic agents who live to
maximise net gains from exchanges in the market.
4. Perfectly Competitive Markets
Mainstream economics assumes that perfect competition prevails in product and factor
markets. Perfect competition requires perfect information, large number of buyers and sellers,
no government intervention, firms as price takers, homogeneous products, etc.
5. Faith in Equilibrium
Mainstream economics believes that markets will always be in equilibrium due to the operation
