A visual representation of the economic divide, symbolizing the challenge of bridging the gap between rich and poor.

Is Inequality Inevitable? New Economic Thinking for the 21st Century

Lena Kashyap in Business & Economy June 2025 • 3 min read.

"A critical look at how modern economics approaches inequality and what alternative perspectives can offer."

The gap between the rich and the poor has become a defining issue of our time. From political debates to social movements, the conversation about inequality is everywhere. But how do economists, the experts in understanding how money flows, approach this growing divide?

In their book, 'Economics in the Twenty-First Century,' Robert Chernomas and Ian Hudson take a critical look at how mainstream economics tackles this issue. They examine the work of some of the field's brightest minds, the winners of the prestigious John Bates Clark Medal, to see how their research addresses inequality.

But this isn't just another economics textbook. Chernomas and Hudson challenge the very foundations of modern economic thought, asking whether its focus on individual choices and mathematical models is enough to understand the complex social and political forces that shape our economic reality.

The Four Pillars of Traditional Economic Thinking

A visual representation of the economic divide, symbolizing the challenge of bridging the gap between rich and poor.

Chernomas and Hudson argue that mainstream economics rests on four key pillars:

Rational self-interest: The idea that people always make decisions to maximize their own benefit.
Individualism: Focusing on individuals as the primary unit of analysis, rather than broader social structures.
Mathematical modeling: Using complex equations to explain economic phenomena.
Econometrics: Relying on statistical techniques to analyze data and test economic theories.

The authors contend that these pillars, while seemingly objective, can blind economists to the bigger picture. By focusing on individual choices, they may overlook the powerful social forces that influence those choices, such as cultural norms, power dynamics, and historical context.

For example, the book points out that mainstream economists often treat markets as if they exist in a vacuum, untouched by outside forces. However, government policies, corporate lobbying, and social movements all play a role in shaping how markets operate. Ignoring these factors can lead to a distorted understanding of economic reality.

Beyond the Numbers: A Call for a Broader Perspective

Chernomas and Hudson's critique is a call for economists to broaden their perspective and consider the social and political forces that shape our economy. By incorporating insights from other disciplines, such as sociology, political science, and history, economists can develop a more nuanced and relevant understanding of inequality and its potential solutions. It challenges the next generation of economists to move beyond traditional assumptions and embrace a more holistic approach to economic analysis. This includes encouraging critical analysis, cross-disciplinary engagement, and a commitment to broadening horizons beyond conventional graduate training.

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Everything You Need To Know

What are the four key pillars of traditional economic thinking, according to Chernomas and Hudson?

According to Chernomas and Hudson, mainstream economics is built upon four key pillars. These are: 1) Rational self-interest, which assumes individuals always make decisions to maximize their own benefit; 2) Individualism, focusing on individuals rather than broader social structures; 3) Mathematical modeling, using complex equations to explain economic phenomena; and 4) Econometrics, which involves using statistical techniques to analyze data and test economic theories. Chernomas and Hudson suggest that while these pillars aim for objectivity, they may limit economists' ability to see the larger social and political influences on economic realities, potentially leading to a distorted understanding of inequality.

How do Chernomas and Hudson challenge the traditional economic view of markets?

Chernomas and Hudson challenge the mainstream economic view of markets by arguing that economists often treat markets as if they exist in a vacuum, untouched by outside forces. They contend that government policies, corporate lobbying, and social movements all significantly shape how markets operate. By ignoring these factors, mainstream economics can develop a distorted understanding of economic reality, especially when analyzing issues like inequality.

What is the central critique Chernomas and Hudson offer regarding modern economics' approach to inequality?

Chernomas and Hudson's central critique revolves around the idea that modern economics, with its focus on rational self-interest, individualism, mathematical modeling, and econometrics, may be too narrow to fully grasp the complex social and political forces that shape economic reality. They suggest that by overemphasizing individual choices and quantitative analysis, mainstream economics may overlook the broader structural and contextual factors that contribute to inequality. This limited perspective can lead to incomplete or distorted understandings of the issue.

Why do Chernomas and Hudson advocate for a broader perspective in economic analysis, and what disciplines do they suggest incorporating?

Chernomas and Hudson advocate for a broader perspective in economic analysis because they believe that the traditional focus on individual choices and mathematical models is insufficient to understand complex issues like inequality. They suggest incorporating insights from other disciplines such as sociology, political science, and history. By doing so, economists can gain a more nuanced and relevant understanding of the social and political forces that shape the economy, leading to better-informed analyses and potential solutions for inequality. This cross-disciplinary approach allows for a more holistic view, accounting for factors that traditional economic models might overlook.

What implications arise from the limitations of mainstream economics, as highlighted by Chernomas and Hudson, concerning the understanding and resolution of inequality?

According to Chernomas and Hudson, the limitations of mainstream economics, particularly its reliance on rational self-interest, individualism, mathematical modeling, and econometrics, can hinder the effective understanding and resolution of inequality. By overlooking broader social and political forces, mainstream economics may fail to address the root causes of inequality, leading to ineffective or incomplete solutions. This narrow focus may perpetuate the problem by not accounting for power dynamics, historical context, and cultural norms that significantly influence economic outcomes. Embracing a more holistic approach, as suggested by Chernomas and Hudson, could lead to more comprehensive and equitable strategies for tackling inequality.