Economic models need a modern overhaul, but the entrenched nature of academic economic programs - hidebound is not a bad descriptor - makes this fairly unlikely

Economic models need a modern overhaul, but the entrenched nature of academic economic programs - hidebound is not a bad descriptor - makes this fairly unlikely. A central issue is 'aggregate demand' - this needs replacement by individual-level demand analysis. An obvious issue is that if a small wealthy sector of society is consuming heavily, while the vast majority is in a belt-tightening phase, any aggregate demand measure is not going to capture either sector and will have a massive distorting effect on projected outcomes. Yes, individual-level models would be vastly more computationally demanding, but this is now possible. Similarly, consider the effect of lowering interest rates in a system where a small wealthy sector has mechanisms in place to capture all that liquidity, so instead of small business starts increasing, stock buybacks by major corporations are the norm. Again, this is where 'aggregate demand' misses that fine-scale structure that really controls outcomes. Fundamentally, these economic models aren't capturing the effects of gross wealth inequality. One of the most astute economic contrarians who raises this issue is Gary Stevenson: https://www.youtube.com/@garyseconomics https://www.youtube.com/@garyseconomics