===================== HES POSTING ===================== 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. -------- 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. ============ FOOTER TO HES POSTING ============ For information, send the message "info HES" to [log in to unmask]