Your Mainstream Economics Decoder Ring
31 Assumptions and Claims that Limit Political Imagination—And How to Think Beyond Them
Introduction
Have you ever felt frustrated when economic experts shut down policy discussions with phrases like "we can't afford it" or "that would hurt the economy"? What if you had a way to decode exactly what assumptions they're using—and whether those assumptions actually make sense?
This document is your decoder ring for mainstream economics. It reveals 31 hidden assumptions and claims that economists and politicians use to make helpful policies seem impossible. Once you understand how this coded language works, you'll never be fooled by economic arguments designed to limit what seems possible.
Here's what's really happening: For the past 50 years, economics has disguised itself as neutral science, but it's actually a collection of political tools. Real sciences test their basic assumptions and change course when evidence proves them wrong. Economics does the opposite—it ignores contradictory evidence and trains students never to question core beliefs.
This isn't an accident. Today's mainstream economics came from corporate-funded think tanks in the 1940s, created specifically to fight policies that helped working people. Through decades of corporate money flowing to university economics departments, these political ideas got repackaged as "scientific" economics by the 1980s.
Your decoder ring breaks the code. When politicians invoke economic "principles," they're using secret language to make alternatives seem impossible. This document shows you exactly which assumptions drive which arguments and gives you evidence to challenge each one. You'll be able to diagnose any economic argument in real time and understand whether those assumptions actually make sense.
This document is entirely focused on critiquing mainstream economics theory and showing how its assumptions constrain political thinking. It doesn't present alternative economic theories or thought patterns from outside mainstream economics (which I will do in a future write-up).
How to Use This Document
This is a diagnostic tool for economic arguments in political debates.
Step 1: Spot the pattern. Look at the "Common Political Thinking Patterns" section to see if the economic thinking matches any pattern group.
Step 2: Look up the details. Go to those numbered assumptions in the "Reference Guide" to understand how that constraint works and what evidence contradicts it.
Step 3: Respond confidently. Use the evidence to challenge the economic argument and think creatively about policy alternatives.
Example: Someone says "universal healthcare would bankrupt the country." This relates to assumptions #7 (Government Budget Constraint) and #18 ("We Can't Afford It"). Look those up to learn that countries controlling their own currency can fund any program they have the real resources to implement.
Quick Reference Guide
Pattern Groups - Common Political Thinking Patterns:
Pattern Group 1: Passive Approaches - waiting for change to happen automatically
Pattern Group 2: Individual-Focused Solutions - expecting personal choices to solve systemic problems
Pattern Group 3: Technology/Money Misconceptions - misunderstanding how monetary systems work
Pattern Group 4: Anti-System Approaches - believing markets can't be reformed
Assumption Groups - The 31 Economic Constraints:
Group 1: Core Behavioral Assumptions (#1-3) - how people make decisions
Group 2: Market Structure Assumptions (#4-6) - how markets supposedly work
Group 3: Fiscal and Monetary Assumptions (#7-9) - government budget myths
Group 4: Growth and Distribution Assumptions (#10-12) - helping people "hurts" economy
Group 5: Methodological Assumptions (#13-15) - making bad theory seem scientific
Group 6: International and Development (#16-17) - trade and development myths
Group 7: Political and Policy Claims (#18-21) - everyday political arguments
Group 8: Additional Economic Orthodoxy (#22-31) - specific policy constraints
Most Common Arguments you'll encounter:
"We can't afford it" → See #7, #18, #22
"That would hurt the economy" → See #10, #20, #24
"Government intervention distorts markets" → See #4, #19, #26
"Let the market decide" → See #4, #5, #26
"People just need to work harder" → See #2, #27
"Environmental regulations cost jobs" → See #12, #25
"We have to be fiscally responsible" → See #7, #21, #22
Common Political Thinking Patterns
These patterns show how economic constraints scatter progressive energy into unproductive approaches. Each pattern includes numbered references to specific assumptions you can look up for detailed analysis.
Note: Not all 31 assumptions appear here—many show up in expert policy debates. Read the complete Reference Guide to understand the full range of constraints.
Pattern Group 1: Passive Approaches (Waiting for Change)
These approaches assume economic systems follow inevitable laws and change happens automatically without strategic political intervention.
"Late-stage capitalism" decline thinking (see #7, #10) - accepting constraints as real rather than seeing them as barriers strategic governance can remove.
Waiting for "institutional transformation" (see #4, #26) - not understanding tools available now to reshape institutions.
Waiting for capitalism's "internal contradictions" (see #5, #14) - assuming economic systems follow inevitable laws rather than responding to political intervention.
"We need degrowth/post-growth economics" (see #10, #12) - accepting that growth necessarily means environmental destruction rather than understanding strategic governance can create beneficial growth.
Pattern Group 2: Individual-Focused Solutions
These approaches assume systemic problems can be solved through individual choices rather than collective political intervention.
Believing individual action is meaningless (see #2, #27) - not understanding how insights can be organized into strategic frameworks for systemic change.
"Consumer choice/ethical consumption will change everything" (see #1, #2) - believing individual market decisions can solve systemic problems.
"We just need better financial literacy" (see #1, #27) - assuming the problem is individual knowledge rather than systemic design.
"Small business/entrepreneurship will save us" (see #4, #26) - accepting that markets automatically reward good ideas rather than understanding economies need strategic support.
Pattern Group 3: Technology/Money Misconceptions
These approaches misunderstand how monetary systems work, leading to dismissal of policy tools or faith that technology alone can replace democratic governance.
Treating money as "imaginary" (see #7, #9) - missing that understanding how money works is essential for strategic policy.
"Cryptocurrency/blockchain will replace the corrupt system" (see #9, #17) - not understanding how monetary systems work and believing technology can replace democratic governance.
"Universal Basic Income will solve everything" (see #5, #23) - accepting that capitalism can't provide good jobs rather than using tools to guarantee full employment.
Pattern Group 4: Anti-System Approaches
These approaches assume markets are natural forces that can't be reformed or strategically designed.
Believing "capitalism can't be reformed" (see #4, #16) - accepting that markets are natural forces rather than understanding they're designed systems that can serve different purposes.
Reference Guide: The 31 Assumptions and Claims
Assumption Group 1: Core Behavioral Assumptions
These assumptions treat humans as perfectly rational calculators rather than real people influenced by context, emotions, and social relationships.
1. Rational Choice Theory
What they claim: People are rational actors who maximize their benefit based on stable preferences
Why this limits policy: Assumes people respond predictably to market incentives, making direct government help unnecessary
What actually works: People systematically deviate from rationality; they use mental shortcuts, are influenced by context, and care about fairness
How to respond: When someone argues "people will just make better choices if we educate them," point out that good policy design works with actual human psychology, not theoretical perfect decision-makers
2. Methodological Individualism
What they claim: Economic outcomes result from individual choices; social phenomena can be explained by adding up individual behavior
Why this limits policy: Makes structural and institutional analysis seem unscientific
What actually works: Individual outcomes depend heavily on institutional context, power relationships, and social structures
How to respond: When someone says "people just need to work harder," explain that individual success depends heavily on having good schools, infrastructure, and economic opportunities available
3. Stable Exogenous Preferences
What they claim: People's preferences are fixed, independent of social context, and not influenced by economic institutions
Why this limits policy: Makes it seem impossible for policy to shape preferences toward beneficial outcomes
What actually works: Preferences are shaped by institutions, social norms, and policy design
How to respond: When someone argues "you can't change people's values," point to how automatic enrollment in retirement savings dramatically increased participation by changing the default choice
Assumption Group 2: Market Structure Assumptions
These assumptions treat markets as naturally perfect systems that automatically produce the best outcomes without strategic design or regulation.
4. Perfect Competition as Default
What they claim: Markets naturally tend toward many buyers and sellers with perfect information and no market power
Why this limits policy: Makes any deviation from "perfect competition" appear as market failure requiring minimal intervention
What actually works: Most successful markets are designed institutions with rules, regulations, and strategic government involvement
How to respond: When someone says "let the market decide," point out that successful markets like the internet, GPS, and pharmaceuticals all required massive government investment and ongoing regulation
5. Automatic Market Clearing
What they claim: Markets naturally balance supply and demand; unemployment and surpluses are temporary
Why this limits policy: Makes persistent unemployment seem like evidence of "sticky prices" rather than insufficient demand
What actually works: Markets can remain out of equilibrium indefinitely; full employment requires active policy intervention
How to respond: When someone claims unemployment will fix itself if wages fall, explain that cutting wages reduces spending power and makes unemployment worse
6. Pareto Efficiency as Optimal
What they claim: The best economic outcome is one where no one can be made better off without making someone worse off
Why this limits policy: Makes redistribution appear economically inefficient even when it improves overall social welfare
What actually works: More equal societies typically grow faster and more sustainably
How to respond: When someone argues redistribution is "inefficient," point to countries like Denmark and Germany that combine lower inequality with higher productivity
Assumption Group 3: Fiscal and Monetary Assumptions
These assumptions create artificial constraints on government's ability to use fiscal and monetary policy, making effective economic management appear impossible or dangerous.
7. Government Budget Constraint
What they claim: Government spending must be "paid for" through taxes or borrowing; budget deficits create unsustainable debt burdens
Why this limits policy: Makes large-scale public investment appear fiscally irresponsible regardless of benefits
What actually works: Countries that control their currency can fund any program they have real resources to implement
How to respond: When someone says "we can't afford universal healthcare," point out that we have all the doctors, hospitals, and medical supplies we need—the constraint is organizing resources, not finding money
8. Crowding Out Theory
What they claim: Government spending reduces private investment by competing for the same limited savings
Why this limits policy: Makes public investment appear to reduce overall economic activity
What actually works: Public investment typically increases private investment by creating infrastructure, skills, and demand
How to respond: When someone argues government spending "crowds out" private investment, point to how public investment in the internet, GPS, and touchscreen technology created entire industries
9. Money Neutrality
What they claim: Money creation only affects prices, not employment or output in the long run
Why this limits policy: Makes monetary policy appear useful only for controlling inflation, not supporting full employment
What actually works: Monetary policy affects real economic outcomes; how money enters the economy determines its impact
How to respond: When someone says "printing money just causes inflation," explain that it depends on economic conditions—quantitative easing after 2008 created trillions without inflation because the economy had slack
Assumption Group 4: Growth and Distribution Assumptions
These assumptions make it seem like helping working people necessarily hurts the economy, when evidence shows the opposite.
10. Growth-Distribution Tradeoff
What they claim: Policies that reduce inequality necessarily reduce economic growth
Why this limits policy: Makes egalitarian policies appear economically costly even when they improve outcomes for most people
What actually works: More equal societies typically grow faster and more sustainably
How to respond: When someone says "helping the poor hurts the economy," point out that America's fastest growth period (1945-1975) coincided with its most equal income distribution
11. Trickle-Down Distribution
What they claim: Benefits to high earners will automatically spread throughout the economy
Why this limits policy: Makes policies that directly benefit working people appear less effective than policies benefiting the wealthy
What actually works: Direct investment in working families creates more economic growth than tax cuts for the wealthy
How to respond: When someone argues for tax cuts for the rich because it will "trickle down," explain that working families spend money immediately while wealthy people save it
12. Environmental Externality Framework
What they claim: Environmental costs are "external" to core economic activity and can be addressed through pricing mechanisms
Why this limits policy: Makes environmental protection appear costly to economic growth
What actually works: Environmental stewardship and economic development can be mutually reinforcing through strategic policy design
How to respond: When someone says environmental regulations "kill jobs," point to how Denmark became a global leader in wind energy through strategic public investment, creating hundreds of thousands of jobs
Assumption Group 5: Methodological Assumptions That Constrain Analysis
These assumptions make mainstream theory appear more scientific than it is, while dismissing approaches that work better in practice.
13. Mathematical Formalism as Rigor
What they claim: Economic models gain credibility from mathematical sophistication, not empirical accuracy
Why this limits policy: Makes approaches that can't be easily quantified appear unscientific
What actually works: Many successful economic policies resist simple quantification
How to respond: When someone dismisses a policy because "there's no model for it," point out that economic successes like Silicon Valley happened through strategic institution-building that couldn't be captured in equations
14. Ceteris Paribus (All Else Equal) Analysis
What they claim: Economic relationships can be understood by isolating individual variables while holding everything else constant
Why this limits policy: Makes systemic, multi-faceted policy approaches appear too complex
What actually works: Real economic systems have interaction effects and emergent properties that resist isolation
How to respond: When someone says a policy is "too complex to predict," explain that successful transformations like South Korea's development required coordinated approaches across multiple areas
15. Representative Agent Modeling
What they claim: Economic aggregates can be modeled as if they result from a single representative individual's choices
Why this limits policy: Makes distributional concerns appear secondary to aggregate outcomes
What actually works: Distributional differences create different economic dynamics
How to respond: When someone focuses only on "average" outcomes, point out that an economy where one person makes $1 million and nine make nothing has the same average as one where everyone makes $100,000, but very different results
Assumption Group 6: International and Development Assumptions
These assumptions make strategic economic development appear harmful, forcing countries to accept whatever role global markets assign them.
16. Comparative Advantage Doctrine
What they claim: Countries should specialize in what they do relatively best and trade for everything else
Why this limits policy: Makes industrial policy and strategic economic development appear harmful
What actually works: Successful development requires building diverse productive capacity, not just exploiting current advantages
How to respond: When someone opposes industrial policy because "we should stick to our comparative advantages," point out that South Korea went from exporting rice to making semiconductors through strategic government support
17. Capital Mobility Benefits
What they claim: Free movement of capital across borders optimizes global resource allocation
Why this limits policy: Makes regulation of finance appear harmful to economic efficiency
What actually works: Unregulated capital flows often create instability and extract wealth from productive economies
How to respond: When someone argues against financial regulation because "capital needs to flow freely," explain that countries like South Korea and Taiwan built their economies by strategically controlling capital flows
Assumption Group 7: Political and Policy Claims
These are everyday political arguments that shut down policy discussions by making helpful programs appear fiscally impossible or economically harmful.
18. "We Can't Afford It"
What they claim: Government spending on social programs is limited by available tax revenue or borrowing capacity
Why this limits policy: Makes large-scale public programs appear fiscally impossible regardless of benefits
What actually works: Countries with sovereign currencies can fund any program they have real resources to implement
How to respond: When someone says "we can't afford Medicare for All," ask "Do we have enough doctors, nurses, and hospitals?" The answer is yes—we already spend twice as much per person on healthcare as other countries
19. "Government Intervention Distorts Markets"
What they claim: Any government involvement in markets creates inefficiencies and reduces performance
Why this limits policy: Makes strategic market design appear harmful even when it improves outcomes
What actually works: Successful markets require institutional frameworks, regulations, and strategic government involvement
How to respond: When someone says government intervention "distorts markets," point out that the internet, GPS, touchscreens, and most pharmaceutical breakthroughs came from government research
20. "That Would Hurt Economic Growth"
What they claim: Policies that redistribute wealth, regulate business, or invest in public goods necessarily reduce growth
Why this limits policy: Makes policies that improve outcomes for ordinary people appear economically harmful
What actually works: Countries with strong social programs, environmental regulations, and public investment often grow faster
How to respond: When someone argues that helping working people will "hurt growth," point to Germany, which has strong labor protections yet remains one of the world's most competitive economies
21. "We Have to Be Fiscally Responsible"
What they claim: Responsible governance requires minimizing government spending and debt regardless of conditions
Why this limits policy: Makes counter-cyclical spending and public investment appear irresponsible
What actually works: Fiscal responsibility means using government's economic tools effectively to maintain full employment
How to respond: When someone invokes "fiscal responsibility" to oppose public investment, explain that it's fiscally irresponsible to let infrastructure crumble and people go unemployed
Assumption Group 8: Additional Economic Orthodoxy Claims
These are specific versions of mainstream claims that appear in policy debates to make particular types of government action seem impossible or harmful.
22. "Budget Deficits Create Unsustainable Debt Burdens"
What they claim: Government deficits necessarily lead to excessive debt that burdens future generations
Why this limits policy: Makes deficit spending appear harmful even when it creates productive assets
What actually works: For countries with sovereign currencies, deficits create financial assets for the private sector
How to respond: When someone worries about "burdening our children with debt," explain that public investment in education, infrastructure, and technology gives our children better opportunities
23. "Unemployment Reflects Sticky Prices"
What they claim: Persistent unemployment results from wages that don't adjust quickly enough to clear markets
Why this limits policy: Makes unemployment appear as a temporary market adjustment rather than a policy choice
What actually works: Unemployment typically reflects insufficient aggregate demand, not price rigidities
How to respond: When someone says unemployment would disappear if wages fell enough, point out that cutting wages reduces purchasing power and makes unemployment worse
24. "Redistribution Reduces Economic Efficiency"
What they claim: Any policy that redistributes income necessarily reduces overall economic efficiency and growth
Why this limits policy: Makes egalitarian policies appear costly to economic performance
What actually works: Moderate redistribution often improves economic efficiency by reducing inequality's negative effects
How to respond: When someone argues redistribution is "inefficient," point out that extreme inequality wastes human potential, while countries with more equal distributions often have higher productivity
25. "Environmental Protection Costs Jobs"
What they claim: Environmental regulations and clean energy investments necessarily reduce employment and growth
Why this limits policy: Makes environmental policy appear economically harmful
What actually works: Environmental investment typically creates more jobs than it eliminates and builds competitive advantages
How to respond: When someone says environmental regulations "cost jobs," point out that clean energy employs millions and is one of the fastest-growing job markets
26. "Markets Automatically Produce Optimal Outcomes"
What they claim: Unregulated markets naturally tend toward the best possible allocation of resources
Why this limits policy: Makes any government involvement in market outcomes appear harmful
What actually works: Markets produce the outcomes they're designed to produce; optimal outcomes require strategic design
How to respond: When someone says "markets know best," ask why unregulated markets produced the 2008 financial crisis, while countries with better regulation avoided the worst effects
27. "Individual Outcomes Depend on Individual Choices"
What they claim: Economic success or failure primarily reflects individual decisions, effort, and capabilities
Why this limits policy: Makes structural interventions appear unnecessary
What actually works: Individual outcomes depend heavily on institutional context, infrastructure, and opportunity structures
How to respond: When someone says people should "pull themselves up by their bootstraps," point out that even talented people can't succeed without good schools, infrastructure, and economic opportunities
28. "Complex Policies Can't Be Analyzed Effectively"
What they claim: Economic policies that involve multiple interventions are too complex to predict or implement successfully
Why this limits policy: Biases policymaking toward simple, narrow interventions
What actually works: Many successful economic transformations have required coordinated, multi-faceted approaches
How to respond: When someone says a comprehensive policy is "too complex," point to successful examples like the New Deal or South Korea's development strategy
29. "Distributional Concerns Are Secondary to Growth"
What they claim: Economic policy should focus primarily on aggregate growth, with distribution being secondary
Why this limits policy: Makes inequality appear less important than overall performance
What actually works: How growth is distributed affects its sustainability, quality, and social benefits
How to respond: When someone says "a rising tide lifts all boats," point out that without inclusive policies, growth often benefits asset owners while wages stagnate
30. "Industrial Policy Is Economically Harmful"
What they claim: Government attempts to develop specific industries necessarily reduce economic efficiency
Why this limits policy: Makes strategic economic development appear counterproductive
What actually works: Successful countries typically use industrial policy to build competitive advantages
How to respond: When someone opposes industrial policy as "picking winners and losers," point out that countries like Germany, South Korea, and Taiwan built world-class industries through strategic government support
31. "Financial Regulation Harms Economic Efficiency"
What they claim: Regulation of financial markets necessarily reduces economic efficiency and growth
Why this limits policy: Makes financial regulation appear costly to performance
What actually works: Well-designed financial regulation improves economic stability and channels investment toward productive uses
How to respond: When someone argues against financial regulation because it "hurts efficiency," explain that unregulated finance often becomes extractive rather than productive
Conclusion
You now understand that the economic constraints limiting American political imagination are artificial, not real. The 31 assumptions and claims of mainstream economics that make effective governance appear impossible are theoretical constructs, not natural laws.
Once you see these constraints as artificial, you can't unsee them. Every time someone says "we can't afford it," you'll recognize the false budget constraint. Every time someone claims "markets know best," you'll understand that markets produce the outcomes they're designed to produce. Every time someone argues that helping working people will "hurt the economy," you'll know that broad-based prosperity actually strengthens economic growth.
This isn't just intellectual understanding—it's practical power. Understanding these constraints as artificial gives you the tools to challenge any policy debate, question any economic argument, and imagine governance approaches that seemed impossible before.
You now have the foundation for economic imagination. The question is: what will you do with it?
A little confused about this last one:
Believing "capitalism can't be reformed" (see #4, #16) - accepting that markets are natural forces rather than understanding they're designed systems that can serve different purposes.
The title seems to refer to the general economic system of capitalism, but the description only refers to markets, which have existed in many non-capitalist systems. Perhaps it'd be used to add an entry like: Believing capitalism = markets?