ABSTRACT
It is extraordinary to discover that no one knows why people want goods. Demand theory is at the very center, even at the origin of economics as a discipline. Yet 200 years of thought on the subject has little to show on the question. It is important to know why demand is sometimes stable, sometimes careers along with inflating speed, and sometimes goes slack while people save rather than spend. But economists carefully shun the question of why people want goods. They even count it a virtue not to offer suggestions. In the past, too many illicit intrusions from psychology have damaged their theoretical apparatus. It has now been painstakingly cleansed. It can answer questions about consumers’ responses to changes in prices and incomes, so long as the period is short term and so long as “tastes” can be treated as given, as the ultimate unexplainable factor of demand that is used to explain everything else. On this academically restricted basis the machine can grind powerfully and exceedingly fine. But when it comes to policy problems, the theoretical gears mesh badly with social reality. The cool consensus that economists display on questions of economic method dissolves into a heated wrangle when a major economic crisis appears.
