THE RAND PORTCULLIS AND POST-AUTISTIC ECONOMICS

Edward Fullbrook

These days people like to call neoclassical economics 'mainstream economics' because most universities offer nothing else. The name also backhandedly stigmatises as oddball, flaky, deviant, disreputable, perhaps un-American, those economists who venture beyond the narrow confines of the neoclassical axioms. In an attempt to understand how this has happened, the first half of this section very roughly traces the strange history of economics from the 1870s through to the recent challenge to the neoclassical hegemony from the post-autistic economics movement, henceforth PAE. The second half surveys some of the substantive dimensions of PAE, a movement that began in Paris in the summer of 2000 and now involves thousands of economists worldwide in a long-term effort to free economics from its neoclassical straitjacket.

Physics envy

The origins of neoclassical economics are not what an outsider might think. Though today it cavorts with neoliberalism, it began as an honest intellectual and would-be scientific endeavour. Its patron saint was neither an ideologue nor a political philosopher, nor even an economist, but Sir Isaac Newton. The founding fathers of neoclassical economics hoped to achieve for the economic universe what Newton had achieved for the physical universe (and their descendants living today believe they have). Their aim was to fashion an economic model in the image of Newtonian mechanics – in which economic agents could be treated as if they were particles obeying mechanical laws. In principle it would be possible to describe the behaviour of such agents simultaneously, by a solvable system of equations. This narrative required the treatment of human desires as fundamental data: like the masses of physical bodies in classical mechanics, they would not be affected by the relations being modelled. It was to this end – not to the understanding of economic phenomena – that homo economicus or economic man and the hedonistic calculus were invented. Thorstein Veblen sums up the core metaphysic as follows:

The human material with which the inquiry is concerned is conceived in hedonistic terms; that is to say, in terms of a passive and substantially inert and immutably given human nature ... The hedonistic conception of man is that of a lightning calculator of pleasure and pains, who oscillates like a homogeneous globule of desire of happiness under the impulse of stimuli that shift him about the area, but leave him intact. He has neither antecedent nor consequent. He is an isolated definitive human datum ...

With this construct at its centre, the dream of a determinate model of the economic universe was realised in the 1870s by William Stanley Jevons and, especially, by Léon Walras, both of whom were in part physicists by training: it was called the model of general equilibrium. And this elaborate mechanistic metaphor, proudly devoid of empirical content, remains today the grand narrative of economic theory, for students and economists everywhere.

The model, which is invariably expressed in language so metaphorical that it would make a good poet blush, works by laying down a priori, like Euclidean geometry, a set of axioms:

• The economic universe is determinate.

• It exists in a void rather than in an ecosystem.

• All relations in an economy are self-regulating, in the sense that any disturbance 'sets in motion forces tending to restore the balance.

• These 'forces result exclusively from the behaviour of isolated individual agents.

• The behaviour of these agents conforms to certain mathematical properties. For example, consumer choice is characterised by transitivity (if X is preferred to Y and Y to Z, then X is always preferred to Z), completeness (out of the set of all possible bundles of goods, given a consumer's income, she will consider her preference between every pair of them) and independence (consumers are not influenced by the choices of other consumers).

To their credit, few economists have tried to provide empirical support for these axioms. Instead this is a realm in which formalistic expediency rules. The entities of the model, and the relations between them, must be conceived in a way that makes them isomorphic to those of Newton's model of the physical universe. The exigencies of the grand metaphor rule even when the model is (as in the pedagogically popular Marshallian tradition) applied piecemeal and non-mathematically to individual markets. An example of such formalism is the elementary and ubiquitous notion of market demand for a product. Because a macro mass is in fact an additive function of its micro masses, neoclassical economics defines market demand as the additive function of the demands for product X of individual agents. But this assumes that everyone's demand for a product is independent of everyone else's demand for that product; for example, that one's choice of a disco is not influenced by whether it is crowded or dead empty. Without such an assumption of independence (that is, the absence of all inter-subjective effects) market demand as understood by mainstream economics does not exist. But as everyone knows – even neoclassical economists when they are off-duty – strong inter-subjective effects in markets are the rule rather than the exception in consumer societies. However, in spite of such obvious and widespread empirically observable difficulties, the metaphors of neoclassicalism have remained dominant.

Veblen and Keynes

At the very end of the nineteenth century, Thorstein Veblen launched a counter-revolution against the growing domination of the neoclassical approach in economics. Besides critiquing the neoclassical assumptions, he analysed institutions as well as isolated individuals, emphasized emergent social phenomena, argued that habit influenced economic choice more than rational calculation, rejected all forms of reductionism, and stressed the importance of knowledge in economic evolution. This approach steadily gained adherents in the years leading up to the first world war, and in 1917 one its leaders, John R Commons, was elected president of the American Economics Association (AEA). The following year this new school was christened 'institutional economics' at the AEA meetings, and was embraced by the association as a means of making economic theory capable of addressing the problems of economic development that would follow the conclusion of the war. In the US in the 1920s the Institutionalists came to rival the Neoclassical but in the 1930s their numbers declined. Like neoclassical economics, institutional economics had...