===================== HES POSTING ==================== On Sun, 17 Aug 1997 14:33:10 MST Pat Gunning <[log in to unmask]> wrote: > Whatever we take "neoclassical economics" to be, don't you think that > the first step is to contrast it with "classical economics?" Can I add a thought prompted by Pat's question (but which probably doesn't help with the definition of neoclassical economics)? A major difference between classical and neoclassical economics which is rarely mentioned in this context is the role of demography. In the classical economics (Smith, Ricardo, etc.) population is endogenous. Wages above subsistence lead to population growth. Hence, in a static model, wages are reduced to subsistence (as in parts of Ricardo). In a growing economy wages are above subsistence, but tied to it (as in Smith). In (most) neoclassical economics population is exogenous. So in the classics wage determination is different from the determination of other factor incomes. In neoclassical economics wages and rents are essentially on a par - the amount of land and the number of people are given. People divide a given endowment of time between different uses just as land is divided between different uses. (Marx was confused - he tried to abandon Malthusian demographics but keep the subsistence wage.) Many of the main differences between ealy nineteenth (classical) economics and early twentieth century (neoclassical) economics seem to follow from this difference, not from the adoption of marginal analysis which can be seen (as Marshall saw it) as a refinement rather than a rejection of the classics. In terms of time, the marginal revolution and the shift in the role of demograhics did not coincide exactly, but by the time the dust settled both were complete. The oft-touted idea of surplus is a consequence of Malthusian demographics, albeit only in a crude, static formulation - wages are at subsistence, so non-wage incomes are the 'surplus' over subsistence. Drop the demographics and subsistence wages vanish, so surplus is no longer an interesting idea. I know there is a modern economics of population, but it doesn't play the same role at all. Tony ---------------------- Tony Brewer ([log in to unmask]) University of Bristol, Department of Economics ============ FOOTER TO HES POSTING ============ For information, send the message "info HES" to [log in to unmask]