In our First Hand interview with Paul Ormerod, he said, “The idea that you can be successful [in business] by following a few simple rules is very alluring. But almost by definition it can’t be true. If it were true, then everyone would do it.”

When you’re explaining why most companies — and most other things — eventually fail, shots at business bestsellers are hard to avoid. But Ormerod, an economist, has also taken two book-length shots at his own discipline. Standard economics, he says, offers advice that isn’t much better than what you find in the bestsellers.

Here’s an example: the rule that companies should set their prices to equal marginal costs. This formula is one of the cornerstones of modern economics, but Ormerod has two problems with it. The first is that even the best informed company will find it enormously difficult to get the data it needs to do what the formula says. The second is that the formula doesn’t work, anyway. At least not in the real world.

Then there’s the assumption that agents — that’s you and me — respond only to changes in price, not to the preferences of other consumers. That is, we don’t want something just because everyone else has it. That assumption is refuted by what we see around us every day. So why is it still a part of standard economics models? Because otherwise those models would be almost impossible to analyze mathematically.

It’s this lack of connection to the real world that’s at the core of what he thinks is wrong with economics, and this article summarizes his criticisms.