Foundations of neo-classical economics OR why I’ve just been baptized into a new religion

Early in my first quarter of macro, the professor stated divergent equilibrium paths of the economy can be dismissed because they wouldn’t result in movement toward steady-state. At the time, it struck me as odd that we would dismiss these paths of the economy out of hand.

I asked something like, “What’s the difference between an economy that takes a million years to blow up and one that’s in steady-state?” Even after two quarters of macro and a quarter of general equilibrium, I never got a satisfactory answer to my question. Why must the economy be in steady state?

Christian Arnsperger and Yanis Varoufakis, writing in the silly named online journal post-autistic economics review, ask this question in a more broad discussion of the foundations of modern economics.

What does an intelligently dispassionate observer of neoclassical economics see? She sees an ever expanding technical literature, most of which she cannot comprehend. She sees an almost infinite series of mathematical models that explain diverse socio-economic phenomena as part of some equilibrium scenario which posits autonomous actors bringing on the phenomenon under study, often supra-intentionally, through choices that are rational given everyone’s beliefs (even when the actions are self-defeating). She sees a series of career paths that are made generously available to those who participate in this global research project. She sees economists the world over being taken seriously only to the extent that they speak this particular ‘language’. She sees the powers-that-be speak this very ‘language’. Finally, she sees enterprising academics in other social sciences adopting this ‘language’, in a transparent bid to share into neoclassicism’s discursive success. In short, the onlooker sees, correctly, power oozing out of the mainstream economists’ theoretical practices.

There is only one thing she does not see: [discussion of foundations] … methodological individualism: the idea that socio-economic explanation must be sought at the level of the individual agent … methodological instrumentalism: all behaviour is preference-driven or, more precisely, it is to be understood as a means for maximising preference-satisfaction … axiomatic imposition of equilibrium … agents’ instrumental behaviour is coordinated in a manner that aggregate behaviour becomes sufficiently regular to give rise to solid predictions.


2 Responses to “Foundations of neo-classical economics OR why I’ve just been baptized into a new religion”

  1. 1 SWong July 14, 2006 at 4:39 pm

    Well, duh.

  2. 2 Will July 14, 2006 at 7:59 pm

    Oh gawd, I wrote one of *those* posts.

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