Summary of Nate Hagens' 10 Core Myths Still Taught in Business Schools

"In reality it is all about power". I could not agree more. As a social scientist (who has never studied economics) most this has been obvious to me for decades. And I suspect it is also obvious to anyone else who applies normal social heuristics to the world around them. But those indoctrinated into economics and business orthodoxies can only see the narrow boundary story, because it is what has worked for the one percent for hundreds of years, so it makes sense to continue to imitate that game. And it works, for one percent and all those who reinforce the myths. But a new game is emerging. Not least, as renewable energy decentralises the way power works we are likely to see that reflect in distributed socio-economic power towards localised/regionalised scales, and we would be wise therefore to watch out for the reactions of the establishment to that shift.

Nate Hagens  09/06/25:

(https://www.youtube.com/watch?v=GkIedVEkQZU)

Myth 10: Price Equals Value

If you’ve taken an economics class, you’ve heard this: Something is worth what someone is willing to pay for it. If you’ll pay $100 for a painting and I’ll only pay $50, the logic says you value it more, and thus, society values it at $100. Simple, right?

But here’s the catch: Willingness to pay isn’t about value—it’s about purchasing power. A poor villager needs clean water but can only afford 10 cents. A billionaire wants a third yacht and spends $10 million without blinking. By market logic, the yacht is "worth" more. Does that make sense? Not to me—and not to reality.

This belief isn’t just wrong; it’s dangerous. It leads to overproducing luxuries for the wealthy while underproviding basics for everyone else. Worse, markets ignore what can’t be priced—like forests that prevent floods. Economists call these "externalities," but they’re often the foundations of life: clean air, stable climates, functioning ecosystems.

The result? A system that prioritizes what the richest want, undervalues what most people need, and destroys what can’t be bought.

Myth 9: Humans Are Rational, Selfish Utility Maximizers

Economics assumes we make decisions by coldly calculating costs and benefits, acting like perfectly logical agents in a spreadsheet. But decades of neuroscience, psychology, and behavioral economics show otherwise.

We’re messy, emotional, deeply social creatures. We chase status, copy others, avoid losses more than we seek gains, and often act against self-interest just to fit in. We’re not isolated "homo economicus" robots—we’re tribal, irrational, and wired to belong.

The problem? Systems built on rationality myths create fragile markets, shallow relationships, and a culture that mistakes materialism for fulfillment. If we want an economics that works, it must reflect real humans—not spreadsheet fantasies.

Myth 8: The Upward-Sloping Supply Curve

The textbook story: As production scales, each additional unit costs more to make, so higher prices justify expansion.

Reality? The opposite. In tech and manufacturing, scaling lowers costs (think software, smartphones). Alan Blinder, a top economist, admits 90% of firms don’t have upward-sloping supply curves—and I’d argue it’s closer to 100%.

This isn’t a quirk—it’s the norm in a world of automation and global supply chains. The result? Winner-takes-most markets, not healthy competition. Yet antitrust policies still pretend we’re in a world of local shops and hand tools.

Myth 7: Energy Is Just Another Commodity

Business schools teach that capital and labor drive productivity, while energy is just another input—like copper or wheat—substitutable and unimportant.

This is catastrophically wrong.

Energy underpins everything. No energy? No economy. Labor without energy is a corpse. Technology without energy is a sculpture. Cities without energy are museums.

Here’s the math:

1 barrel of oil = 1,700 kWh of work potential.

1 human working full-time = 0.6 kWh/day.

Adjusting for efficiency, 1 barrel = 4–5 human labor-years.

We use 100+ billion barrels of oil equivalent yearly—like adding a 500 billion-person labor force to the global economy. Yet energy isn’t even in the core economic models.

Worse, energy isn’t substitutable. You can’t replace oil with money or innovation—only with equivalent energy. And fossil fuels are finite capital, not infinite income. We’re burning through Earth’s trust fund, pretending it’s a paycheck.

Myth 6: Money Comes From Savings

The textbook story: People save, banks lend those savings, charging interest.

Reality? Most money is created out of thin air when loans are issued. You sign a mortgage, and the bank types numbers into your account—new money, backed by debt. Central banks (like the Fed and Bank of England) admit this.

This means money isn’t a fixed pool but a dynamic flow, constrained only by regulation and repayment ability. We’re creating trillions in monetary claims on a finite planet—like a Ponzi scheme against biophysical reality.

Myth 5: Debt Is Neutral

Debt is framed as just moving consumption across time—neutral if returns exceed interest.

But debt is a bet on future energy and resources. If those falter (due to climate change, depletion, etc.), debt systems unravel.

Data shows: Since the 1970s, global debt has grown faster than GDP. We’re borrowing more for less return—diminishing gains with escalating risk. At some point, we’ll face a "too big to save" moment—a debt crisis no central bank can fix.

Myth 4: GDP Measures Progress

GDP counts all monetary transactions—whether building hospitals or cleaning oil spills. It conflates costs with benefits.

A sicker society (more healthcare spending) = higher GDP.

A leveled forest (timber sales) = higher GDP.

A standing forest (ecosystem services) = $0 in GDP.

GDP is a speedometer, not a map. It measures economic motion, not well-being, resilience, or ecological health.

Myth 3: The Economy Contains the Environment

Textbooks treat the environment as a minor subset of the economy. This is backward.

The economy is a subset of the environment. Everything depends on natural systems—climate, soil, water, biodiversity. Yet economic models price these at zero, pretending they’re infinite.

Reality doesn’t negotiate. We can print money, but we can’t print topsoil or coral reefs. Ignoring this is like measuring profits while burning the factory down.

Myth 2: The Invisible Hand Optimizes Outcomes

Adam Smith’s "invisible hand" suggests self-interest magically benefits society. But markets only work for priced, rival goods—not clean air, trust, or climate stability.

Without rules to account for shared costs, markets overproduce private gains and underproduce public goods. The invisible hand isn’t a law—it’s a tool that reflects the rules we build.

Myth 1: Economic Laws Are Universal Truths

Economics pretends its models are like physics—timeless, universal. But they were built in a unique historical bubble: the fossil-fueled, colonial, growth-crazed 20th century.

These "laws" ignore ecological limits, social complexity, and the fact that cheap energy and stable ecosystems were one-time gifts. Treating them as immutable is like using a 1900s map to navigate 2024.

Conclusion

I used to think economics would self-correct as evidence mounted. Now I suspect it’s about power, not truth. The myths serve the superorganism’s growth—more energy, more consumption, more claims on a finite world.

For economics to reflect reality, we’d need institutions that value truth, trust, and long-term thinking. But in a polarized, short-term world, that’s a tall order.

These 10 myths aren’t minor errors—they’re foundational flaws. If we want a future that works, we need an economics grounded in real humans, real ecosystems, and real physics.