councilor.org
| Source | Jim Devine |
| Date | 99/06/26/18:54 |
| 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. Since it evolves over time, neoclassical economics is hard to pin down. But I think that Phil Mirowski's general definition works. Modifying his definition a bit, neoclassical economics: 1. employs mathematical modeling rather than institutional analysis or historical evidence as its main tool for understanding the world (formalism); 2. claims to be "scientific" in a positivist or Cartesian way, in imitation of idealized natural science (positivism); 3. utilizes constrained maximization, equilibrium, and comparative statics as its main analytical pillars (equilibrium economics); 4. emphasizes individual utility-maximization (consistent goal-seeking) as the determinant of human behavior (utilitarianism); 5. always seeks out microfoundations, i.e., solely individual explanations of aggregate phenomena (reductionism, methodological individualism); and finally, 6. leaves many of the most important variables, such as tastes and technology, as exogenously determined by ature or other forces outside of the economist's concern (naturalism). To Mirowski's list, I would add a final tenet, hopefully as a friendly amendment. To neoclassicals, 7. institutional forms in the economy are either to be explained as exogenous impositions, from, say, the political sphere, or as explainable in terms of individual preferences and technology, along with such "natural" phenomena as incomplete information and transactions costs. On the other hand, the broad vision of liberalism (which includes the classical _laissez-faire_ liberalism or Mrs. Thatcher and Ronnie Raygun and Milton Friedman and the technocratic liberalism of Bill Clinton or Lawrence Summers) can be defined by can be defined by its primary question: Given a large number of atomized and roughly equal self-interested individuals (or households) and natural constraints, what institutions and policies allow a society to attain the common good? Following methodological individualism, the liberal view starts with the "private" sphere of individuals (or households), presumed to be isolated and to exist prior to the whole, and then develops or derives the "public" sphere of collective activity. The basic (constitutional) decision about institutions, aimed at solving the problem of the conflict between individual interests and the public interest, is made by a social contract (sometimes hypothetical or tacit, as with John Rawls). The social contract involves an agreement among individuals concerning the basic issues of the nature and distribution of property and power. The basic assumption is that underlying the hurly-burly of competition among the variety of viewpoints and interests is a basic societal consensus, since otherwise liberals could not talk about the "public interest" or the "common good." Typically, liberals follow John Locke to assume that the preservation of pre-existing property rights is part of this consensus. However, most do not go all the way with _laissez-faire_ since property-owners can benefit from some restrictions on their property rights. Note also, that (following Locke), property does not simply include land, stocks & bonds, means of production, etc., but also the individual's own life and liberty. Jim Devine |
Copyright (c) 1998, Joongpil Cho