When Leon Walras set out to made economics a science, he sought to describe the workings of the market using mathematics and even captured the mechanics of its dynamism – the notion that the system is just trying to head towards equilibrium. But the problem with real markets is that the prices never clears the market. Equilibrium is never reached.
If the Walrasian equilibria were reached, there’d be no goods on the shelves of any shops. All the goods would already immediate be in the hands of those who are willing and able to pay for it. And no one would really have the opportunity to master any jobs or pick up any skills reliably because they’ll always be switching jobs and jumping back and forth different production curves in order to optimise the market. Time was a missing ingredient in those equations of economics.
So the equilibria-seeking economics was useful as a way to describe and think about markets to some extent. But for the problems we are dealing with today, we need a new set of economics and approaches that enables us to move the world forward. This is already available as part of development economics and the new institutional economics – we’ve had decades of experiences thinking about laws, competition, market organisations and design in order to guide ourselves all towards the outcomes that can improve the world. It’s probably time for the basic foundations of economics to be about incentives and behaviours rather than demand and supply.