 This is the fourth part of a talk on current economic crisis in Pakistan and solutions. In this part, we explain how core economic theories serve to justify and defend capitalism rather than describe economic realities. The gist of previous parts of this talk can be described as follows. In exploiting a country via colonialism or neocolonialism is beneficial to the powers that govern the country. These powers benefit from an enslaved economy adapted to their interests rather than an independent and empowered one. But to get the consent of a large number of people to their own exploitation, they have been taught and trained in economic theories which lead them to believe that the economic system and use which actually exploits them is actually beneficial for them. An economic theory, modern economic theory is one of the important tools for doing this brainwashing. So, this fourth part of the talk describes three core theories of modern economics. But before we discuss the theories, we discuss some guiding principles for understanding theories about society. And these principles are that social theories, theories about society cannot be understood outside of the historical context in which they were produced because there are theories about a society and societies are always situated in geography and time. They are particular societies. There is no theory which applies to all societies at all times. A second very important thing to keep in mind in understanding theories about society is that these theories are products of power. Those people who are in power produce theories which are favorable to their interests and impose them on others by using their power to shape the educational systems. Both of these guiding principles are absent and missing from modern economics and this is what permits modern economics to deceive. In accordance with these guiding principles, we first describe the history of how social sciences emerged in Europe and though this is long and complicated, we can summarize it as follows. Basically influx of translations of Arabic books in libraries of Islamic Spain which became available to Europe after the reconquest of Islamic Spain, flooded the European centers and of learning, Catholic Church attempted to fight against them and censored and suppressed this knowledge which was against the orthodox doctrines of the Catholic Church. This battle eventually split the Church into two parts and the Protestants and the Catholics fought bitter and bloody wars for more than a century and this thing soured everybody in Europe to religion and in particular it became a pragmatic necessity to develop a social theory on secular foundations because it seemed clear from the historical experience that building societies on religious basis would lead to wars and persecution. And so one of the major conclusions from this is that theories of society based on Christianity were replaced by theories of society based on secular modernity. So this secular modernity is a religion which replaced Christianity. Rejection of Christianity led to the attempt to build society on ideas quite the opposite of Christian. So there is no creator, no afterlife, no judgment which means that the universe was created by an accident and our lives are meaningless. Life becomes a jungle of ferocious competition, the only rule is survival of the fittest. And so the goal of life is to maximize our pleasure, power which enables us to get pleasure and the wealth. And these are the conceptions which underlie modern economic theory and the social sciences. The rejection of Christianity and the attempt to reshape society on secular foundations was central to the great transformation described by Karl Polanyi from traditional societies which were built on cooperation, social responsibility and generosity. Instead secular modernity attempted to build society on competition, individualism and greed. There were some particular historical circumstances in Europe which led to the triumph of these views and this led to create a favorable environment for the birth of capitalism and of a market society which is necessary to sustain capitalism. A market society is where the values of the market overwhelm traditional social values. So for example, careers are prioritized over family, profits making by firms is prioritized over social responsibility and in our lives we prefer to accumulate wealth rather than to build social networks and accumulate friends. So what is capitalism? It has evolved and changed and is complex and infinitely diverse but the core remains exactly the same as Karl Marx described it centuries ago and basically what he said is that ownership of capital which has changed from industrial machines to financial capital but regardless ownership of capital is concentrated in the hands of a small class and this class wields power and authority they need to use the masses either as labor or as consumers to produce goods and to buy them and to create profits. The less wages they pay to the laborers the greater profits made by the capitalist. How much is paid to laborer depends on the power of the two classes the capitalists and the laborers because they have a lot of power they are capitalists are able to exploit labor by paying them low wages and making large profits. So if we think about economic theory the best way to think about them is to think about how they affect the balance of power between capitalists and laborers. So from this perspective we analyze three core theories of modern economics all three theories are false but all serve to prop up the power of the capitalists. Even more powerful than any individual theory is the idea that the economy is an autonomous mechanism which just operates on its own just like the planetary system nobody can interfere with it this is wrong we determine the economic laws of our own society by our social consensus but the idea that it runs on its own makes it appear as if it is inevitable and it is a mechanism which operates and makes it resigned to its operations whereas if we think that this is created by our decisions then we would want to alter those decisions. One of the core theories is the idea that every human being seeks to maximize pleasure this is just wrong empirically human beings are not sociopaths they don't they care about others they care about social approval they work for the sake of others without self-interest and this is actually necessary for survival because in society we depend on each other for survival and also our long-term welfare depends on our relationships which depend on our character and this doesn't depend on our level of consumption so the idea that we should maximize the pleasure we get from consumption fails both descriptively and normatively the economic theories that firms maximize profits fails descriptively Alan Blinder has shown that most firms set prices economic theory actually acknowledges that in markets where firms have market power supply and demand does not hold because instead of dictating the intensive price being created by forces of supply and demand firms actually set prices according to their own market power and John Kenneth Galbraith has said that firms attempt to create a demand for their goods which are often useless because that also serves to maximize profits and Neumann Klein has explained how firms use branding to acquire market power for generic products so the market power already refutes the idea of supply and demand as the setting of prices and there are other technical reasons why supply and demand profit maximization cannot be correct basically the prices are determined in the future which is subject to uncertainty and costs are incurred in the present while you produce goods so you can't maximize profits because you don't know what the prices are going to be tomorrow and so the correct theory of pricing is called markup pricing you take your costs and you apply a certain markup the market markup depends on a lot of different factors and this is a much more adequate description much more correct description of what happens in actual markets as opposed to markets described by economic theory so even though textbooks acknowledge that supply and demand does not hold in markets where firms have market power when it comes to applications they simply ignore this idea and assume without any evidence that all markets are competitive and so supply and demand theory applies to all markets and what is the reason for this basically this serves to hide the power of the capitalist to set prices so to summarize this section core economic theories are false consumers do not maximize utilities firms do not maximize profits prices are not determined by supply and demand but these theories serve to justify capitalism everybody is self-seeking so it's okay for the capitalism to capitalist to be self-seeking it is okay for them to maximize profits even if it causes social damage because that's just how people are and so basically these theories serve to buy some level of support for the public from the public for a system which actually exploits them