Neoclassical economics, utility theory, methodological individualism, general equilibrium, critique of neoclassicism, institutionalism, macroeconomic approach, effective demand, Animal Spirits
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Abstract
A comprehensive analysis of the neoclassical economic thought, its limitations, and criticisms, including the role of utility, individualism, and the concept of general equilibrium.
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[...] - The two theories have a normative scope: ideal economy, " it is an economy of "laboratory"." - Pure political economy theorizes an economy "without friction", frictions, rigidities: the market in pure and perfect competition (P.P.C) - The delay with reality would be explained by these rigidities and frictions ? The second neoclassical wave Well-being individual collective well-being (naturally)? Pareto optimum Social optimum: impossible to increase the well-being of an agent without reducing it for another How? Compare the utilities of two different individuals? Pareto will propose a utility ordinal (ordered according to preferences) so far cardinal (measurable and comparable among goods). [...]
[...] - How to move from individual optimum to social optimum? o Market (Austrian school) o State (Scandinavian school: Wicksell) Another approach to economics: institutionalism - United States early 20th century - Heterodox Currents: positions itself in opposition to neoclassicism and to classics - Inspirations: German historicism and pragmatist philosophy - Role of institutions in economic behavior - Approach more 'holistic', global of society. It considers that the individual is inserted into an environment - Inductive approach: observation analysis (opposed to abstraction) - Approach pluridisciplinary: philosophy, sociology - It starts from the principle that every context determines every theorization - Economics: a science tracing the concomitant evolution of behaviors and of social institutions; economics as the resulting from a process cumulative characterizing these evolutions. [...]
[...] A doctrinal revision centered on unity The neoclassics remain attached to individual interest as a motor The utility is at the heart of the reasoning (utilitarianism of J. Bentham: Human nature has placed the human spirit under the direction of two sovereign masters: pain and pleasure. It is only in relation to them that we act and determine what we should do.) : arbitration pains/pleasures (quantifiable) permanent at the basis of reasoning. Marginalist current: neoclassics and marginalists say: all decision is a reflection at the margin. [...]
[...] - Theory suggesting the optimal allocation of resources made possible by . the market that coordinates needs. Market functions if the competitive market is not hampered - Framework of pure and perfect competition where there exists UN general equilibrium (static) of the economy - CPP : perfect competition is perfect: when there is atomicity of agents, homogeneity of the good, free entry, transparency (all information must be accessible), mobility of production factors. This economy does not exist - Equilibrium characterized by a system of prices allowing simultaneous equilibrium on all markets (interdependent). [...]
[...] - Economic theory reconciling the market and state intervention. Markets not necessarily efficient possible durable imbalance, [...]
