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Heterodox Economics

Foundations of Alternative Economics

Hasan Gürak

Mainstream economic textbooks propose a kind of economic world which can only exist in fictitious markets where producers and consumers interact like robots, relations are mechanical and assumptions utopian. Accordingly, the expositions are, in substance, nothing but sophistry. Yet, many economists are becoming more and more discontent with the sophistries of mainstream doctrines. The book presents some realistic alternative approaches to the conventional ‘unrealistic’ attitudes of mainstream economists in order to pave the way for a further development of new ideas.


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Chapter 4: PRICE


Price Theory holds a very crucial position in economics since it is the funda- mental basis of all other economic theories ranging from production- con- sumption theories to international trade and income distribution. For instance both producers as well as consumers adjust their market behavior according to the price signals from markets. Price signals are also capable of causing serious fluctuations in the magnitude of crucial variables like growth, inflation and un- employment. If there is no “realistic, sound and reliable” price theory at hand, then it is highly unlikely to have a “realistic, sound and reliable” theory for growth, foreign trade, inflation, or any other area of economics. Therefore, it is imperative to have access to a realistic and competent price theory, which is log- ically, consistent as well as practically relevant. A price theory should not only be able to explain exchange ratios, e.g., the relative prices between two commodities, but also actual market prices. In addi- tion, price theory should also be able to explain price formation in the service sector, which accounts for a greater part of the GDP of all countries than the manufacturing sector, both in terms of output and employment. This important issue, however, seems to be completely ignored in traditional price theories. Moreover, a price theory should also be able to account for the sources of and the further generation of exchange-values in the long term. Only then, could we get a more realistic insight into economic transactions, how to design realistic...

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