Posted in Finance, Accounting and Economics Terms, Total Reads: 130
Definition: Mainstream Economics
Mainstream economics deals with the financial markets, functioning of governments, and demand and supply of goods and services. It is also known as orthodox school of economics as opposed to the heterodox economics which includes the very different approaches like Marxist and socialist.Mainstream Economics is a most commonly used form of economics. This form of economics is taught in many universities under different forms and names.
It differs from other school of economics on many fronts like based on assumptions of mainstream economics, methods of it and the topics it includes. The fundamental school of thought in mainstream economics says that individuals always make rational decisions which maximizes wealth and utility. Secondly Mainstream Economics uses various mathematical models like calculus and statistics to work. There are multiple theories under mainstream economics like money multiplier theory which deals with the amount of reserves held by a bank and the loan it should make. The theory of fiscal austerity which says government should cut on its spending in order to reduce the fiscal deficit. However there have been multiple criticism to the mainstream economics, especially after the financial crisis of 2008. Since the crisis showed the loopholes under the mainstream economics which fails to explain the crisis through a model it uses. A closely related term is neoclassical economics which along with the theories of great economist John Keynes forms the modern mainstream economics.
For Example: Micro and Macro-economics which is superseded by neoclassical economics taught in universities is an example of Mainstream Economics. According to mainstream economics the labor in economy works rationally and for the maximization of profit.