This is a sketch of a short book explaining the many ways that economics misleads students (and misinforms policy discussions) by failing to reveal the assumptions behind the theory.

1. Part 1: Strange Ideas of Standard Economic Theory (SET)
   1. Interpersonal comparisons are impossible
      • SET: Do I like cherry pie more than you like a poke in the eye — there’s no way of knowing.
   2. The worst possible society is optimal and perfectly efficient
      • Idi Amin owned everything in Uganda — SET: that’s Pareto Optimal, which is by definition economically efficient.
      • OK it’s a mathematically consistent theory, but is it any basis for scientific understanding, or is it just good for ideologues?
   3. All humans are sociopaths
      • SET: Their behavior is described by utility functions, which by definition cannot contain any information about others.
      • Hence people can only care about themselves — they cannot have a conscience. That’s the basic definition of a sociopath.
   4. The pinnacle of microeconomics is a pair of math theorems.
      • No part of physics is a math theorem, and math works far better in that science than in economics.
      • We know they are just math theorems because they are mathematically true, but false for human societies.
   5. Preferences are consistent therefore people can predict the future.
      • Economists define “rational” to mean consistent preferences.
      • SET says that since our preferences are (fairly) rational, we must have “rational expectations.”
      • The two ideas are unrelated, but this proof by innuendo is used because, in most cases, there is not a shred of evidence for rational expectations.
   6. If everyone’s productivity goes up, their marginal products go down, so we pay them less, and that’s what they deserve.
      • More productivity is equivalent to increasing the supply of labor.
      • So the wage (price of labor) goes down, and marginal product equals the wage.
      • But this has nothing to do with “deserve.”
2. Part 2: Some theories of non-sociopathic behavior
3. Part 3: Why the fundamental welfare theorems are not science
4. Part 4: Why SET rationality (sociopathy) is not such a good thing
   • SET rationality is sociopathic behavior (this does not mean violent).
   • Sociopaths are poor cooperators
     • The rational behavior in a repeated prisoner’s dilemma is total non-cooperation.
     • But real people cooperate quite a lot, because they are not sociopaths — because they are not SET rational.
     • There are many, many other situations in which “non-rational” players do better than SET rational players.
   • This has large-scale (macro) implications as well a micro implications
   • Conclusion: We should try to help people be more rational in some ways, but should not try to make them SET rational.
5. Part 5: Why actual human behavior is not such a good thing either
   • Predictable mistakes
   • Keeping up with the Joneses
   • War
6. Part 6: Policy implications
   1. Nudges
   2. Taxing negative behavioral externalities
   3. Safety nets
   4. Cooperative treaties