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AFTER earning a PhD from Vanderbilt University, Muhammad Yunus, a Nobel peace laureate and now the chief adviser to the interim government, realised the disconnect between mainstream economics and real-world challenges, particularly in developing countries such as Bangladesh. Although trained in mainstream western economic theories, he found the models overly abstract and disconnected from the needs of a vast segment of the population living in poverty. Yunus believed that mainstream economics, with its emphasis on profit maximisation and market efficiency, neglected social justice and human well-being. The realisation led him to develop microfinance and social business models, aimed at addressing poverty and empowering marginalised communities that he saw as a necessary alternative to inadequacies of traditional economic thought.

He is not alone. The discipline of modern economics faces a growing scrutiny from both within and outside the field. Many argue that it has lost touch with pressing issues of our time, such as financial crises, poverty, inequality and environmental degradation. As the global challenges escalate, a consensus emerges that the discipline relies too much on theoretical models delinked from complexities of real-world behaviour. Critics assert that economics is on trial, calling for substantial reforms in both practice and education and even for the abolition of the Nobel memorial prize in economic sciences.

One core criticism is that modern economics rests on overly simplistic assumptions about human behaviour. Central to mainstream theory is the idea of the ‘rational economic agent’ — an individual who always acts to maximise utility or satisfaction. While useful for building models, this concept has limited relevance in the real world, where behaviour is influenced by emotions, social norms and biases. Non-economists, particularly from fields such as sociology and psychology, argue that this abstraction leads economists to ignore the actual motivations behind decisions, making much of the theory irrelevant.

This disconnection between theory and application has been glaring, especially after major global crises. The 2008 financial crisis, for example, exposed how economic models failed to predict or prevent systemic failure. Warning signs — such as unsustainable debt and risky financial products — were visible, yet many mainstream models ignored them. Following the crisis, economists acknowledged that their models were inadequate for capturing the complexities of the global system. Nobel laureate Paul Krugman admitted, ‘The economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth.’

The inability to foresee crises has led some to question whether economics qualifies as a scientific discipline. Unlike natural sciences, where theories can often be empirically tested, economics deals with ever-changing social systems and unpredictable human behaviour. Some argue that economics is more of an art, requiring judgment rather than strict adherence to mathematical models. This has brought the Nobel memorial prize in economic sciences under fire, with critics questioning if such a prize is appropriate for a field that lacks the empirical rigor of other sciences. Biologist Richard Dawkins remarked, ‘It is misleading to consider economics a science in the same way as physics or chemistry. It is subject to human whims and irrationality far more than atoms and molecules.’

Established in 1968 by Sweden’s central bank, the Nobel prize in economics is not one of the original Nobel prizes. Critics argue that it promotes a particular brand of economics — neoclassical economics — which prioritises market efficiency and growth over social welfare. Many laureates have advocated for free-market policies that have contributed to the rise of neoliberalism, emphasising deregulation and privatisation. Critics say these policies have worsened inequality, especially in developing countries. As a result, some call for abolishing the Nobel prize in economics, claiming it gives undue prestige to a discipline that is far from universally accepted.

The demand for reform extends to economics education as many argue that university curricula are too narrowly focused on neoclassical theory, emphasising markets and efficiency while neglecting broader issues of human welfare. Alternative approaches — such as ecological, feminist, and behavioral economics — are often marginalised or ignored. This has led to a growing movement among students calling for a more pluralistic approach to economics education that includes diverse perspectives and acknowledges the limitations of the neoclassical framework.

One vocal group advocating for change is the International Student Initiative for Pluralism in Economics, founded in 2011. The group argues that the narrow focus of economics education leaves students ill-prepared for the challenges of today’s global economy. The group calls for an interdisciplinary approach that integrates insights from sociology, psychology, political science, and environmental studies. Economist Kate Raworth, known for her Doughnut Economics (2017) framework, supports this view: ‘We need an economics that is fit for the 21st century, one that sees the economy as embedded in society and the environment, not as something that can endlessly grow at their expense.’

Some universities have begun to revise their curricula to include more diverse perspectives. For example, ecological economics, which views the economy as a subsystem of the environment, is gaining attention as concerns over climate change rise. Behavioural economics, which incorporates psychology into decision-making models, is also gaining ground. However, many programs still prioritise traditional, neoclassical theory.

The push for reform goes beyond expanding curricula. Critics argue that economics should prioritize human well-being and sustainability over efficiency and growth. This shift would challenge the assumption that markets are always the best mechanism for resource allocation, instead emphasizing the roles of governments, institutions, and social norms in shaping economic outcomes. As former World Bank chief economist and Nobel laureate Joseph Stiglitz said, ‘Economics has to be reconstructed on a broader foundation, one that recognizes the centrality of inequality and environmental challenges to our understanding of how economies actually function’ (The Price of Inequality, 2012).

Perhaps in Bangladesh, too, economists can help to foster a discourse on how to reform economics and how it is taught and practised.

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Dr Mohammad Omar Farooq is professor and head of the economics department at the United International University.