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I have probably missed some of the contributions toward defining
neoclassical economics so that what I say here may repeat. For that I
apologize. If it contradicts, that is another story. In any event,
and after many years of involvement with economics, usually from
beyond the pale, here are the characteristics that seem to me
fundamental to what I understand neoclassical economics to be.
1. An assumption that the most important aspects of the range of
human activity having to do with material provisioning (and corollary
activity) can best be analyzed and described as a series of choices.
That is, such activity is not best described as culturally patterned
or repetitive, as institutionalists would say.
2. An assumption that the choices made are best analyzed and
described as being structured by unlimited wants and scarcity of means
and are made AS IF they were being made by a commercial firm using
money as a multi-purpose unit of account (in other words, as a
numeraire) and using double-entry bookeeping.
3. An assumption that the individual human being is the appropriate
unit of analysis and that social groups are the sum of individuals.
This is close to the same as #1 but helps define the difference
between classical and neoclassical. One of the sloppy or useful
things about classical as opposed to neoclassical economics--sloppy or
useful depending on whether you take the neoclassical or
classical/institutionalist view--is that the class analysis of
classical economics carried with it a lot of cultural traits that were
not individual--capitalists did one thing, landowners another.
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The power of neoclassical economics, both among economists and among
others, derives, I think, from the power of a deeply embedded cultural
process of reasoning. Among the symbols and meanings that form
Western culture are propositions about individuals and rationality
that seem beyond question. Among these is the view, argued by
Schumpeter in Capitalism, Socialism and Democracy, that "rationality,"
is--simply is--the commercial rationality made possible by use of a
numeraire and double-entry bookkeeping. The growth of neoclassical
economics in the 19th century, and in this, was part of the expansion
of this "commercial logic" to an ever widening range of human
activity. (To go back to another thread, this is what Polanyi argues
in The Great Transformation.) Neoclassical economics is both analysis
of and justification of this development since it reaffirms the
proposition that such commercial logic is indeed the essence of
rationality. How else, the neoclassical economist and the
well-trained political leader ask, can we make decisions about
education, pollution, family organization save by rational
cost/benefit analysis? Anything other than a process of weighing
costs and benefits (note the need for a numeraire and the process of
bookkeeping) is fuzzy and soft thinking, and not really rational.
At this point, after two centuries of extension of this logic, it is
hard to question the assumptions without appearing foolish. Wants,
being culturally created, say institutional economists and many
anthropologists among others, are not unlimited but that sounds
utopian. Households and other groups of people are not commercially
driven firms (M--> C --> M is not what it is all about) but that
sounds largely irrelevant or not very tough-minded. So the power of
neoclassical analysis remains unchallenged.
Mary Schweitzer and others started this thread by wondering about the
relationship between neoclassical and mainstream economics. A lot of
mainstream work does not require invocation of the assumptions of
neoclassical analysis, so the two are not the same. However, work
that requires any direct challenge to the assumptions described above
is non-mainstream. Further, it is important, particularly for young
economists, to show that their descriptive work is consistent with the
assumptions above and that often requires logical contortions to show
why some described behavior can be modelled as utility maximization.
Indeed, a cynic might say that the greater the contortions, so long as
elegantly presented, the more prestigious the publication.
On a more generous note one interesting thing to read and think about
is how great economic thinkers/researchers of this century--I would
include Veblen, Schumpeter, Polanyi, Alfred Chandler among others--have
either been "tamed" (Schumpeter and Chandler, and sometimes even
Veblen) to be consistent with neoclassical assumptions, or have had to
be rejected (Polanyi and most often Veblen). It is a fascinating
process of culture making as understood by anthropologists: a process
whereby humans construct reality by use of common understandings,
symbols and meanings that are assumed through cultural inheritance to
be the nature of humans and of the universe.
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