What is neoclassical economics?

14 March, 2014 at 09:10 | Posted in Economics | 4 Comments

For your edification, I offer this link to an elegant explanation of why neoclassical economics presents itself as purely scientific and denies any ideological commitments, and strangles pluralism.

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In brief: Arnsperger and Varoufakis define “neoclassical” economics in terms of three “meta-axioms.” First, neoclassicism assumes “methodological individualism,” i.e. that economists must ultimately posit individuals’ behaviors as the root cause of broad economic phenomena. Second, it assumes “methodological instrumentalism,” i.e. that these actors are somehow or other acting instrumentally in pursuit of goals, are “irreversibly ends-driven.” Third, it assumes “methodological equilibration,” i.e. rather than asking whether or under what conditions shall a state of affairs continue unchanged, it seeks to show that if equilibrium occurs, then it will endure.

The big twist of Ansperger and Varoufakis’ argument is that by keeping these assumptions well-hidden and unquestioned, neoclassicism simultaneously guts its own ability to effectively explain and predict real-world economic phenomena AND expands its own discursive authority.

The real genius of this article is in demonstrating how this paradoxical circumstance occurs. They carefully and explicitly reject the view that economics professors are cynically and purposively responsible as a “conspiracy theory.” Instead, they pursue a “functionalist” explanation (which seems like maybe the defining characteristic of science itself: showing how cause and effect, independent of any overarching purpose, lead from situation A to situation B), which boils down to funding sources. Basically, they claim that economists who pursue technical elaborations, “who simply ‘get on with the job,’” get funding while those who raise important but non-actionable questions about assumptions, method, and framework do not. “No one wants to keep quiet on the meta-axioms. They are just too busy building magnificent edifices on top of them, and being magnificently rewarded for it” …

So the three meta-axioms of neoclassical economics define the language and concepts which can/must be invoked by any economist who wishes to be taken seriously. By presenting as self-evident and obvious, they effectively make themselves invisible while also precluding alternative approaches.

Casey Jaywork

[h/t Mark Buchanan]

For my own take on this issue, see, e.g., here and here.

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4 Comments »

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  1. The question is if the analysis can be applied to just any church.

  2. Does this let mathematicians off the hook?

  3. The article is wrong because methodological refers to a method of learning about what exists, not a hypothesis of what exists (for examples a 4-D space in special relativity). Ergo, it cannot refer to axioms but only to a method of learning. Therefore, the use of “methodological” and “axiom” simultaneously, is a contradiction. regardless of whether neoclassical economics has any merit, the article is confusing the method of learning about nature with any ontological claims that could be present in such method, which may or may not be relevant. I am nto surprised, because when economists mix philosophy in their arguments, the result is usually extremely bad, even worse than the object of their attack.

    • Can you suggest a method of learning about what exists that does not make any assumptions about the nature of what exists? I am intrigued.


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