The critical role for economic theory is no longer simply to explain how the existing system works, but also to explore how the economic system can be changed to become more adaptive and resilient in the face of the challenges of the 21st century, and how it can be more directly designed to support human well-being, in the present and the future. Simultaneous changes are needed, in both the actual economy (how it functions, by what rules, how it can be made responsive to constraints) and also in economic theory.
The economic theory that was accepted as standard in the non-communist world during the second half of the twentieth century erects serious impediments to meeting the challenges of the twenty-first century.Her list of 'serious impediments' is an interesting one; some of them we identified in the Anti-Textbook, some we missed, while others, more macroeconomic in nature, were beyond the scope of our book.
She goes on to sketch out "two overarching concepts" that could be thought of as "final goals" for any economy, in contrast with intermediate goals that would be things we'd need to do to help attain the final goals (for example, reductions in inequality, or more consumption for those suffering shortfalls in absolute needs). The first final goal is "well-being and equity in the present"; the second is "productive capital for the future", not only the capital of the standard textbooks (plant, equipment, infrastructure), but natural resources, human health and education, and cohesive social systems.
Mainstream economic theory, as reflected in its textbooks, takes a narrower approach while viewing "the economy as separate from its social and ecological contexts". Goodwin asks:
So what is the alternative? There are, of course, many: ecological, radical, feminist, social, humanistic, old and new Institutionalist, old and new Keynesian, and many other kinds of economics. Each of these emphasizes one part – sometimes a critically important part – of what is missing in the standard approach. But it doesn’t work just to plug in something new: there’s too much wrong with the whole approach. It is necessary, I believe, to start afresh, using as building blocks the best pieces from each of the various alternatives, as well as from standard theory, but fitting them all into a new design-- a design she calls "Contextual Economics" that recognizes that
an economic system is embedded within a social context that includes ethics, norms and human motivations, and the culture that expresses them. It also includes politics – that is, the deployment of economic and other kinds of power – as well as institutions, and history. Equally important is the recognition that an economic system is embedded within a physical context that includes the built environment, as well as the natural world from which all the materials we use ultimately derive. The health of any economic system is absolutely dependent on the health of these embracing contexts.That works for me, but it's a long way from the picture given in the economics textbooks on which I was raised.