Aaron S. Hawley (aaronhawley) wrote,
Aaron S. Hawley
aaronhawley

Spring cleaning

After 50 years as an academic economist, spending it deconstructing the neo-classical economics of Alfred Marshall and his "Cambridge School" -- of which she was a member early in her career -- and producing work deserving of a Nobel Prize, Joan Robinson would instead see the system resurrected in the US -- notably by the "Chicago School" of Milton Friedman and Fred Hayek. In 1980, she commented on the poverty of orthodox economics and sketched a solution.

After the Second World War, the baton of leadership in teaching economics, along with leadership in the capitalist world, passed to the USA. Instead of meeting the challenge of the Keynesian revolution head on, the profession in the USA split the subject into two parts, macro and micro. In the macro section it was permissible to contemplate fluctuations in employment and even to hint at remedies for a deficiency in effective demand, while micro theory returned to the analysis of equilibrium established by the free play of market forces. Keynesian ideas were allowed a certain sphere of operation while the central doctrine was safely walled off from them.[...]

The whole subject [of inequality] is so embarrassing that in fact it is scarcely mentioned. There is no treatment at all of the determination of the distribution of income in orthodox teaching, and precious little about its consequences. What to the general public appears one of the most interesting of all questions in economics is simply left out of the syllabus.

In its general influence on educated public opinion, orthodox teaching has been not merely feeble and confused but positively pernicious. It gives support to the view that expenditure by a government that is beneficial to the inhabitants of its territory is 'socialism' and must be prevented at all costs. This reconciles an otherwise more or less sane and benevolent public opinion to the arms race which seems to be dragging us all to destruction. But that is another story.

It seems to me that the whole complex of theories and models in the textbooks is in need of a thorough spring cleaning. We should throw out all self-contradictory propositions, unmeasurable quantities and indefinable concepts and reconstruct a logical basis for analysis with what, if anything, remains.

From the essay "The theory of normal prices and reconstruction of economic theory" published in Issues in contemporary macroeconomics and distribution edited by George R. Feiwel.

Tags: economy
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