[PEN-L:8365] Re: Thomas Friedman an economist?

[Rod Hay <rodhay@xxxxxxxxxxx>]

Brad is right that very good, very intelligent neo-classical economist
attempt to separate the technique from the ideology. I don't think that they
are completely successful.

For instance, individualism is exaggerated in neo-classical technique as in
is in liberal ideology. Some times this is a good thing, for instance when
we are dealing with societies that attempt to suppress individuals. But it
presents very important limitations to neoclassical economics itself. As
pointed out by Veblen, is you allow for social influence on individual
tastes, it is no longer possible to reach an equilibrium position. Without
an equilibrium neoclassical economics is in difficulty. Any serious analysis
would want to know something about the interplay (dialectic) between
individual choice and social influence.

One can interpret the Arrow-Debreu model as the ultimate undermining of
neoclassical general equilibrium. By showing the conditions that are
required to reach an equilibrium, they demonstrate that it is extremely
unlikely to occur in any actual economy. (The necessity for perfect and
complete futures markets has been pointed out). This is some similar to what
Marx did in volume 2 of capital with his two sector model. The conditions
for equilibrium are rare and unstable. And what Keynes did for money markets
with his lack of co-ordination between desired savings and desired
investment.

Of course most of us don't run into extremely careful and expremely bright
neo-classical economists very often. Most don't even realise that there is a
difference between technique and ideology.

Brad is also right that if used carefully and with eyes open to the
difficulties neo-classical techniques are useful for analysing some
situations. For instance, in cases where it is safe to assume that
preferences are stable, and where individual utility maximization are
encouraged.

The work of the experimental economists is interesting. It is very hard to
create a situation where the subjects of the experiments will act with
completely selfish motivation. Since most of these experiments are run on
students, it is interesting to note that economics students act more as the
model predicts that other students.



----Original Message Follows----
From: Jim Devine <jdevine@xxxxxxxxxxxxxxx>





it's important to separate "neoclassical economics" (from Samuelson to Sen)
from the "liberal political world-view" (as seen in Clinton's and
Friedman's work). The former is infused with the latter ideology, so that
they are hard to separate in practice, but they are not the same.




Rod Hay
rodhay@xxxxxxxxxxx
The History of Economic Thought Archives
http://socserv2.mcmaster.ca/~econ/ugcm/3ll3/index.html
Batoche Books
http://www.abebooks.com/home/BATOCHEBOOKS/




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