Neoclassical economics: a pretend science

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 Michael Yates reviews three critiques of the absurd economic theories that are taught in colleges and universities everywhere …

Michael Yates, an economist and a labor educator, is associate editor of Monthly Review. 

Economists have taken certain scientific concepts—such as equilibrium, stability, efficiency, feedback loops—and certain mathematical and statistical techniques and notions—such as calculus, probability, normal distribution, randomness, independence—and applied them to society in ways both inappropriate and simple-minded. …

[W]hile economics has scientific pretensions, it is primarily an ideology that supports the interests of the rich and powerful, and in the process, confers prestige, influence, and money on its practitioners.

Neoclassical economists assume that society is made up of independent, self-interested, and all-knowing human beings, who come together in marketplaces over which they exert no control, and all at once arrive at agreements in such a way that every market clears. That is, a price is established at which the supply of every single commodity equals the demand for it.

Furthermore, the general equilibrium achieved is one of maximum social efficiency. It is what economists call “Pareto efficient,” after the Italian economist Vilfredo  Pareto; it describes an equilibrium such that no change away from it can make at least one person better off without making anyone else worse off.

Such an economy bears no resemblance to any actual existing economy, nor could it. There is no money in it, no government, no notion that there is a natural world in which production occurs, no workplaces. It is constructed in abstraction from the distribution of wealth and income. It is like a Georgio de Chirico painting, timeless and idealized.

Yet, in an act of stunning legerdemain, neoclassical economists employ this imaginary model as if it were the ideal system of production and distribution, the only one that can be used to judge how well any contemporary capitalist economy is performing.

Read the full review in Monthly Review, or in Michael Yates’ excellent blog, Cheap Motels and a Hotplate



 Like a Georgio de Chirico painting, timeless and idealized

de Chirico: The Architects 


  • I have pasted in this part that corresponds best to my own views:

    “…Neoclassical economists assume that society is made up of independent, self-interested, and all-knowing human beings,…”

    My views, developed over aperiod of ten years, echo these remarks.

    The words in italics at the top of the on-line post/article are equally compelling as any part of the article by Yates: “Michael Yates reviews three critiques of the absurd economic theories that are taught in colleges and universities…”

    This, too (basically the wrod “absurd”), is similar to what I myself have been saying so I respond very well to it.

    The whole thing can be put in an “even” more powerful way than Yates did. It is a fake science. To me such comments are not at all a matter of “easy pot shots at neoclassical economics”, as the comment above has it, but rather the rare person seeing and telling the truth. Once you see it, like I have, it is truly amazing just how BAD this neoClassical economics is. It simply does not make sense, despite the fact that nobody admits to it. It is true; and, it is a bit hard to believe. Neo-classical economics is not true. It is an inaccurate theory. I have studied it for years, and the post and the Yates review are not “easy pot shots”, they are the rare statements of things that everybody ought to be hearing. It (neo-Cl) is a dangerous, absurd body of thought.

    Jack Silverman

  • Enough of these easy pot shots at neoclassical economics. Marx’s Capital too is a theory of a pure capitalism that Marx acknowledges never existed but which 19th c. British economy came closer and closer to resembling until a 2nd industrial revolution in iron and steel and other heavy industries during the imperialist era reversed that trend.

    Marx’s theory of capitalism is also is a general equilibrium theory, albeit not of the Walrasian variety, since it recognizes that labour-power becomes increasingly difficult to manage the closer the capitalist economy moves toward equilibrium, thus setting in motion forces that lead to depression, the introduction of a new generation of technology in capitalist factories and a new capital-labour or value relation.

    Capital does not assume generalized barter but rather shows how commodity money as opposed to fiat money is necessarily generated by widespread commodity trading.

    Capital demonstrates how capitalism’s commodity economic logic can successfully regulate and reproduce material or substantive life under a very limited range of use-value conditions,even if the state adopts laissez-faire economic policies but it is high time Marxists recognize that those use-value conditions no longer exist in the real world and that there are no bourgeois state economic policies capable of supporting the regulation of the economy by the society wide capitalist market and its logic. I wonder what that implies re the continued existence of capitalism.

    Unfortunately,the vast majority of self-described Marxists still have not figured out what Marx’s object was in Capital, what precisely was his dialectical/synthetic method or how Capital could be corrected and completed still speak glibly of capital’s logic operating today as if nothing significant has happened in our substantive economic or use-value life life since Marx wrote Capital.

    Marx’s theory of pure capitalism needs to be supplemented by a stages theory of capitalism’s historical development and decline, which would demonstrate to what extent the leading bourgeois state in each stage of capitalism’s historical development was required to assist the capitalist market and the dominant form of capital in its attempt to subdue intractable use-value and collective human resistance to its logic.

    If, today, state and supra-state institutions policies replace, substitute for and further undermine the operation of a now atrophied capitalist market, which is no longer capable of reliably reproducing material economic life, and if the current economy does not satisfy the general norms of economic life while threatening the living environment far more that light industry ever did during liberal capitalism would it not be appropriate, following Thomas (Tomohiko)Sekine et al to theorize the current era as a phase in the transition away from capitalism toward socialism or barbarism rather than a new stage of capitalism?