A Reflection on Postwar Neoclassical Economics: The Shift from General Equilibrium Theory to the New Microeconomic Theories

Modern China ◽  
2021 ◽  
Vol 48 (1) ◽  
pp. 29-52
Author(s):  
Yuan Gao
Keyword(s):  
General Equilibrium ◽  
Economic Thought ◽  
Equilibrium Theory ◽  
Neoclassical Economics ◽  
General Equilibrium Theory ◽  
Dominant Position ◽  
Economic Practices ◽  
Political Economic ◽  
Small Models

The theoretical focus of neoclassical economics experienced a significant change in the 1970s–1980s. General equilibrium theory lost its dominant position in theoretical economic studies, with its role of setting the research agenda taken over by what this article calls the “new microeconomic theories,” principally decision theory, game theory, and mechanism design. Mainstream economists, post-Keynesians, and historians of economic thought each give a different explanation of the hows and whys of that change, but all miss some critical methodological implications. That change, as this article discusses, shows that neoclassical economics has turned from “grand theory” toward “small models” with empirically delimited utility and that the ideology of marketism lacks a valid scientific foundation. This interpretation can help illuminate the deeper dynamics of the postwar development of neoclassical economics and provide insights for a new political economy that can come to grips with political-economic practices that cannot be fully grasped by the neoclassical tradition.

General Equilibrium Theory and the Rationality of Economics

2008 ◽  
Vol 30 (2) ◽  
Author(s):  
Carsten Köllmann
Keyword(s):  
General Equilibrium ◽  
Philosophy Of Science ◽  
Equilibrium Theory ◽  
Neoclassical Economics ◽  
Pragmatic Approach ◽  
General Equilibrium Theory ◽  
Direct Relevance ◽  
Scientific Legitimacy ◽  
Conceptual Problems

AbstractMost philosophers of economics are hostile towards neoclassical economics in general and general equilibrium theory in the vein of Arrow and Debreu in particular. Especially the latter’s dismissal is justified by pointing out its lack of direct relevance for an understanding of real economies. Many recommend a more pragmatic approach along the lines of Keynes instead. The criterion of scientific legitimacy underlying this approach derives from a philosophy of science developed along the lines of Popper and Lakatos. They, however, neglect the importance of conceptual problems and of the choice of adequate ‘language-systems’ in science. Since these conceptual and ‘linguistic’ aspects may be able to explain and to justify the rationale of the Arrow-Debreu approach, I recommend the more balanced philosophies of Carnap and Laudan, in which conceptual as well as empirical problems are allowed for, as a framework for methodological appraisal. I explain why such a balanced view is obstructed for most philosophers of economics and advocate a moderate pluralism leaving room for different theories, methodologies and language-systems, depending on the scientific aims that are pursued.

scholarly journals Entrepreneurship and Equilibrium

2021 ◽  
Vol 9 ◽  
Author(s):  
Ying Tang ◽  
Walter Block ◽  
David Gordon
Keyword(s):  
Economic Theory ◽  
General Equilibrium ◽  
Economic Thought ◽  
Market Mechanism ◽  
Equilibrium Theory ◽  
The Other ◽  
Economic Activities ◽  
General Equilibrium Theory ◽  
Equilibrium Concept ◽  
Policy Makers

Neoclassic economic theory regards equilibrium, whether general or partial, as a crucially important foundation of the dismal science[1]. In the view of mainstream economists, the general equilibrium framework not only an investigation of the economy in terms of its perfect qualities, but also is suitable as an end or goal of action. The Austrian school, in contrast, sees equilibrium (or the evenly rotating economy - ERE) merely as a tendency for economic activities to move us in that direction, but it is never attained. Praxeological economics has thus concentrated not on equilibrium, but on the process by which the market moves toward it. Since the process of shifting resources to meet these ends cannot be achieved spontaneously, entrepreneurship plays a key role. In Mises and Rothbard’s view, entrepreneurship involves uncertainty bearing which beyond the alertness emphasized by Hayek and Kirzner; on the other hand, unlike Lachmann looks the economy as a kaleidoscope and rejects the ERE, Mises and Rothbard regard the ERE as an indispensable way to understand the economy.   [1] As Frank H. Hahn said “Whatever economics is used or thought about, equilibrium is a central organizing concept.” (Hahn 1984: 43). Many economists and philosophers of science consider mathematical neoclassical general equilibrium theory as one of the peak achievements of economics (Rosenberg, 1992). Tieben (2012) stated that policy-makers and theorists of all schools of economics all use some form of equilibrium theory to develop their ideas and support their main theoretical and political claims. Lawson (2005) indicated that the equilibrium concept is a major cause of controversy between different schools of economic thought. A.W. Bob Coats even deems it the case that “economics has been dominated throughout its history by a single paradigm – the theory of economic equilibrium via the market mechanism.” (Coats 1969: 292).

Some Developments in Economic Theory Since 1940: An Eyewitness Account

2010 ◽  
pp. 4-23 ◽  
Author(s):  
K. Arrow
Keyword(s):  
Economic Theory ◽  
General Equilibrium ◽  
Equilibrium Theory ◽  
General Equilibrium Theory ◽  
Economics Of Information ◽  
Modern Economic ◽  
Eyewitness Account ◽  
Theory Uncertainty ◽  
Professional Formation

The article considers the evolution of some branches of modern economic theory from the perspective of the authors biography as a scientist and his professional formation. It describes problems of econometrics, general equilibrium theory, uncertainty, economics of information, and growth. It is shown how different authors representing various fields came to similar conclusions simultaneously and independently, what were the problems, in response to which economists of the second half of last century developed their theories, and what were the contexts of such development.

Cone Conditions in General Equilibrium Theory

2000 ◽  
Vol 92 (1) ◽  
pp. 96-121 ◽  
Author(s):  
Charalambos D. Aliprantis ◽  
Rabee Tourky ◽  
Nicholas C. Yannelis
Keyword(s):  
General Equilibrium ◽  
Equilibrium Theory ◽  
General Equilibrium Theory ◽  
Cone Conditions
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