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After a bit of reading I feel like presenting some interesting ideas regarding the state of economics. I use the paper Evolution, learning and economic behaviour by Reinhard Selten (1991) and the book Basic Instincts by Pete Lunn (2008) (see here for a full book review).

Where has economic thought been?

"It is no exaggeration to say that orthodox economics is based on the idea that people can be treated, for economic purposes, as if they are selfish, independent calculating machines."
(Lunn, p.ix)

Where should we be?

"The insight the economist offers should echo in our minds when we do business with a company, when we decide to take a job, when we choose one product over another or when we walk down the end of our street to take part in and watch economic life." (Lunn, p.3)

Our task?

"If economists are to be criticised it cannot be for simplifying human nature. We have to. The question is not whether human nature is simplified, but whether the particular simplification is the best one available... Thus the economist needs to isolate the most relevant aspects of our natures; to locate the most powerful determinants of our economic behaviour." (Lunn, p.21)

"[E]conomics has many things going for it. Among the social sciences it is the most numerate. It prides itself on analytical rigour and refuses to tolerate the imprecise definitions and rambling arguments that characterise so much of social science. We don't need less economics; we need better economics." (Lunn, p.259)

And in the mean time?

"It is better to make many empirically supported ad hoc assumptions, than to rely on a few unrealistic principles of great generality and elegance." (Selten)

The way forward?

"We know that Bayesian decision theory is not a realistic description of human economic behavior. There is ample evidence for this, but we cannot be satisfied with negative knowledge - knowledge about what human behaviour fails to be. We need more positive knowledge on the structure of
human behaviour. We need quantitative theories of bounded rationality, supported by experimental evidence, which can be used in economic modelling as an alternative to exaggerated rationality assumptions." (Selten)

"The scientific task ahead is to find a concise description of our most powerful instincts, which can be combined to predict our behaviour in individual transactions, in individual markets or organisations, and finally can be built up into bigger models of the economy - a more behaviourally accurate equivalent of competitive equilibrium." (Lunn, p.264)

On a positive note, what does the future hold?

"Good science involves constant interplay between theory and evidence. It is this interplay which causes scientific revolutions - great leaps in our understanding of the world. Is economics about to be revolutionised? If so, what impact might this revolution have?" (Lunn, p.252)

"A new economics, based on a more accurate theory of our economic instincts, and a more accurate idea of the economic environment in which they prevail, is emerging. Our inability to see where it is going is all part of the fun of the ride." (Lunn, p.266)