Ideological Foundations of Mainstream Neoclassical Economics: Class Interests as “Economic Theory”

Prof. Ismael Hossein-Zadeh

There is now a widespread consensus that mainstream/neoclassical economists failed miserably to either predict the coming of the 2008 financial implosion, or provide a reasonable explanation when it actually arrived. Not surprisingly, many critics have argued that neoclassical economics has created more confusion than clarification, more obfuscation than elucidation. Economic “science” has, indeed, become “an ideological construct which serves to camouflage and justify the New World Order” [1].

Also not surprisingly, an increasing number of students who take classes and/or major in economics are complaining about the abstract and irrelevant nature of the discipline. For example, a group of French graduate students in economics recently wrote an open letter, akin to a manifesto, critical of their academic education in economics as “autistic” and “pathologically distant from the problems of real markets and real people”:

“We wish to escape from imaginary worlds! Most of us have chosen to study economics so as to acquire a deep understanding of the economic phenomena with which the citizens of today are confronted. But the teaching that is offered . . . does not generally answer this expectation. . . . This gap in the teaching, this disregard for concrete realities, poses an enormous problem for those who would like to render themselves useful to economic and social actors” [2].

The word “autistic” may be offensive and politically incorrect, but it certainly provides an apt description of mainstream economics.

Interestingly, most economists do not deny the abstract and irrelevance feature or property of their discipline; but argue that the internal consistency of a theory–in the sense that the findings or conclusions of the theory follow logically from its premises or assumptions–is more important than its relevance (or irrelevance) to the real world. Nobel Laureate economist William Vickery, for example, maintains:

“Economic theory proper, indeed, is nothing more than a system of logical relations between certain sets of assumptions and the conclusions derived from them. . . . The validity of a theory proper does not depend on the correspondence or lack of it between the assumptions of the theory or its conclusions and observations in the real world. . . . In any pure theory, all propositions are essentially tautological, in the sense that the results are implicit in the assumptions made” [3].

Paul Samuelson, another Nobel Laureate in Economics, likewise writes, “In pointing out the consequences of a set of abstract assumptions, one need not be committed unduly as to the relation between reality and these assumptions.”

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