Development and Change, 2011
Snapshot...
There is a second reason arising from a complex interplay of ideological concerns with considerations of practical benefits. If its
fantastic assumptions are accepted, neoclassical economic theory serves admirably to promote the image of a smoothly functioning
market economy to which the real-world economies could be made to conform through minor modifications. It thus becomes a powerful tool in the hands of those ideologically wedded to ‘market fundamentalism’. At the same time, to those with a practical bent
of mind, it appears a ‘rigorous’ method of thinking about the modifications that the real-world economies might benefit from; this is
reflected in the fact that the critics from the mainstream concentrate on the failure of the price mechanism due to specific reasons
like incomplete information, price rigidities, increasing returns, etc. Very few are prepared to even recognize two integral features of
market economies. The first is persistent unemployment that arises from a persistent lack of aggregate demand. It renders the entire
theory, which makes scarcity of resources its organizing principle, problematic. When, for example, you do not operate on the production possibility frontier but inside it, you cannot really define the opportunity costs of products and factors. The second feature
that the mainstream economists underplay (if not wholly ignore) is that conflicts — between consumers and producers, between producers and producers, between producers and workers, and so on — are inherent in price-setting processes. Such conflicts make their appearance in game theory but are not incorporated into a coherent system of generalized economic knowledge. Yet these are what make economic power and class interest unavoidable features of amarket economy. This is what the capital controversy underlined;
Snapshot...
There is a second reason arising from a complex interplay of ideological concerns with considerations of practical benefits. If its
fantastic assumptions are accepted, neoclassical economic theory serves admirably to promote the image of a smoothly functioning
market economy to which the real-world economies could be made to conform through minor modifications. It thus becomes a powerful tool in the hands of those ideologically wedded to ‘market fundamentalism’. At the same time, to those with a practical bent
of mind, it appears a ‘rigorous’ method of thinking about the modifications that the real-world economies might benefit from; this is
reflected in the fact that the critics from the mainstream concentrate on the failure of the price mechanism due to specific reasons
like incomplete information, price rigidities, increasing returns, etc. Very few are prepared to even recognize two integral features of
market economies. The first is persistent unemployment that arises from a persistent lack of aggregate demand. It renders the entire
theory, which makes scarcity of resources its organizing principle, problematic. When, for example, you do not operate on the production possibility frontier but inside it, you cannot really define the opportunity costs of products and factors. The second feature
that the mainstream economists underplay (if not wholly ignore) is that conflicts — between consumers and producers, between producers and producers, between producers and workers, and so on — are inherent in price-setting processes. Such conflicts make their appearance in game theory but are not incorporated into a coherent system of generalized economic knowledge. Yet these are what make economic power and class interest unavoidable features of amarket economy. This is what the capital controversy underlined;
