The Pathetic State of Neoclassical Economics

[Grozny]

The Post-Autistic Economics Network has recently published a paper:

What is Neoclassical Economics? (http://www.paecon.net/PAEReview/issue38/ArnspergerVaroufakis38.htm) (The three axioms responsible for its theoretical oeuvre, practical irrelevance and, thus, discursive power.)


There is nothing more frustrating for critics of neoclassical economics than the argument that neoclassical economics is a figment of their imagination; that, simply, there is scientific economics and there is speculative hand-waiving (by those who have never really grasped the finer points of mainstream economic theory). In this sense, neoclassicism resembles racism: while ever present and dominant, no one claims to be guided by it. Critics must find a clear definition of neoclassicism if only in order to liberate neoclassical economists from the temptation to barricade themselves behind infantile arguments viz. the non-existence of their school of thought. Then, the good debate may begin. I find it absolutely PATHETIC that neoclassical economics is so weak that they allow their enemies to define their foundations. Never clearly stated their axioms in their own literature? Tsk! Tsk! How sad!

In sharp contrast, I state my axioms right up front before proving any theorems from them:

1) One's value scale is totally (linearly) ordered: (http://www.axiomaticeconomics.com/axioms.php#1)

i) Transitive; p ≤ q and q ≤ r imply p ≤ r

ii) Reflexive; p ≤ p

iii) Anti-Symmetric; p ≤ q and q ≤ p imply p = q

iv) Total; p ≤ q or q ≤ p

2) Marginal (diminishing) utility, u(s), is such that: (http://www.axiomaticeconomics.com/axioms.php#2)

i) It is independent of first-unit demand.

ii) It is negative monotonic; that is, u'(s) < 0.

iii) The integral of u(s) from zero to infinity is finite.

3) First-unit demand conforms to proportionate effect: (http://www.axiomaticeconomics.com/axioms.php#3)

i) Value changes each day by a proportion (called 1+εj, with j denoting the day), of the previous day's value.

ii) In the long run, the εj's may be considered random as they are not directly related to each other nor are they uniquely a function of value.

iii) The εj's are taken from an unspecified distribution with a finite mean and a non-zero, finite variance.

Read my Simplified Exposition of Axiomatic Economics (http://www.axiomaticeconomics.com/exposition.php) for a more detailed, but still undergraduate-level discussion of my economic theory. This paper requires knowledge of multi-variable calculus but omits the real analysis that plagues readers of my 1999 book.

[Die Neue Zeit]

Generally speaking, right now Economics studies is so discredited.

To refute the material in your link, though: generally, if I like some fruit, but at a particular moment in time I don't want to eat it for whatever reason, then that fruit has no momentary "diminishing utility" for me whatsoever.

Mainstream economics, your paper, and much of heterodox economics, all fail to distinguish the difference between use-value and exchange value. Whether it's demand-vs-supply or price-vs-stock, things are not as mathematically functional as you'd like them to be. Even an identical twin placed in the exact same situation as me, with all my knowledge and critical thinking skills, would likely go for different use-values and exchange values.

[Grozny]

To refute the material in your link, though: generally, if I like some fruit, but at a particular moment in time I don't want to eat it for whatever reason, then that fruit has no momentary "diminishing utility" for me whatsoever.

Axioms 1 and 2 hold true at every moment in time - they do not compare one's values at different times. Axiom 3 addresses how value changes over time.


Mainstream economics, your paper, and much of heterodox economics, all fail to distinguish the difference between use-value and exchange value.

I don't know the difference between use-value and exchange-value???

That's absurd. Read my Simplified Exposition of Axiomatic Economics (http://www.axiomaticeconomics.com/exposition.php).


Whether it's demand-vs-supply or price-vs-stock, things are not as mathematically functional as you'd like them to be. Even an identical twin placed in the exact same situation as me, with all my knowledge and critical thinking skills, would likely go for different use-values and exchange values.

Straw man attack. I never said that identical twins have identical value scales. Obviously, they are different people and, like all people, have their own values.

[Dean]

Generally speaking, right now Economics studies is so discredited.

I agree. Just take "The Law of Demand," for instance, which I responded to in class earlier today:


The book commits a fatal error throughout the whole chapter - that is that it completely ignores the influence of scarcity in its figures. The simple fact is that expanded demand increases pricing, and that only when demand is fully met does pricing drop for higher levels of demand. The book claims that “all other things equal,” rising demand will beget lower pricing. For one thing, “all other things equal” directly constitutes an argument that supply will stay the same. If supply is at 100 units, the cost at the demand of 1 unit is incredibly low; the cost at 150 units demanded is determined by the market-comparable use value plus shortage costs, and as the demand goes up, so too does cost. The Law of Demand erroneously devises its figures based on an assumption that the market consistently and efficiently meets the need of each consumer; interestingly in a textbook which is not far along from expressing the price valuation present in scarcity markets, it ignores any influence of scarcity – and any other important factors for different commodities – in declaring this a “law,” unsurprising, though, as the law acts in defense of free-market capitalism, which the book clearly supports:

The book commits a grotesque moral offense in its defense of ticket scalping, which is nothing more than price gouging in the entertainment industry. There is a damn good reason why people were outraged at post-Katrina gas costs in LA, and the fact is that they were market-driven prices reflecting supply and demand. But this provides a very succinct example as to why market figures of supply and demand should not be considered “moral compasses” defining the “just” value of trades.

[Die Neue Zeit]

Ticket scalping? But that would mean that the original tickets were not trading at fair values! Oh wait a minute! :rolleyes:

[See the inconsistency here? Many tickets are just "more equal" than others.]

[Die Neue Zeit]

I don't know the difference between use-value and exchange-value???

That's absurd. Read my Simplified Exposition of Axiomatic Economics (http://www.axiomaticeconomics.com/exposition.php).

I have. It retains emphasis on exchange value.

Failure to distinguish the two leads to failure to understand theories of value based on things other than pure exchange, which Milton Friedman worshipped even at the expense of the capitalist myth of "meritocracy."

In simpler terms, I'll restate what I said above by using "society" as an example:

Society likes some fruit, but at a particular moment in time it doesn't want to buy it for whatever reason (it intends to buy the fruits a day or two later) = it has no use-value

In that case, why doesn't exchange value drop to zero and go up again a day or two later?