If the received understanding of economics within government is radically incomplete, how much more so is it within society as a whole. We have been brought up and are daily conditioned to think of human beings as the “agents” of textbook economics: as purely self-interested, endlessly calculating costs and benefits, and highly sensitised to marginal gains and losses. And part of the achievement of economists since Adam Smith is to explain to us why this is OK — how individual self-interest can become social well-being.
But a problem comes when this economic image feeds back into society: when it becomes our default picture of human motivation. For we secretly know this picture is wrong. We are aware that there are routine aspects of our daily lives like volunteering or philanthropy which it cannot properly explain. We know that there are virtues such as loyalty and long-term thinking which seem to run directly counter to it. We fret about the atomisation of society, the commercialisation of human culture and the narrowing of our expectations of others. We over-invest in half-baked prescriptions for happiness. We yearn endlessly for the things money famously cannot buy: love, friendship, joy. Yet without an alternative picture of what a human being is, we cannot free ourselves from our assumptions. This is the intellectual heart of the matter.
In the real world, of course, the key assumptions of textbook economics are rarely even closely approximated. But the effect of this formalisation is to exclude from the theory roughly all of the things that give human life its point and meaning.