The profound implications of continuing to teach 'supply and demand' instead of 'demand and cost' in intro economics courses - an unequal exchange application

Abstract

This paper focuses on how two iconic memes of neoclassical (NC) introductory economics provide the ideological basis for the neoliberal perfectly competitive free market (PCFM) and free trade (FT) economic doctrines. The paper argues that the supply and demand (SDM) and Ricardian comparative advantage (RCA) memes that ostensibly support these doctrines are fundamentally in error both economically and logically, and should be replaced in introductory economics teaching by demand and cost (DCM) and unequal exchange (UE) memes, respectively. The DCM is explained in detail and used to analyse all situations to which the SDM is usually applied. The UE meme, within a DCM framework, is then used to derive principles for fair and sustainable international trade and finance. The paper shows that the DCM and UE memes provide more realistic, equitable, and sustainable views of production and international economies than the fictional SDM and RCA memes, which have become ubiquitous, even in heterodox textbooks.