The Neo-Classical Economists
Economics is faced with six fundamental questions: (i) will the society organized on the principles of exchange (Market Economy) stay composed or will it fall apart (the question of existence of equilibrium)?, (ii) will such an equilibrium be unique (a multiplicity of equilibria poses difficult and embarrassing questions)?, (iii) will such an equilibrium be robust (the question of stability of equilibrium)?, (iv) will such an economy (society) be efficient?, (v) will it grow or expand forever?, and (vi) will it be just? The classical economists, Adam Smith in particular, answered all these questions affirmatively using a characteristic methodology. However, Karl Marx challenged the entire structure of faith in the merits of the exchange economy and shattered all optimism regarding the said order.
The Neoclassical Economists, mostly using their own new (mathematical, marginalist, rationalistic, atomistic, hedonistic, etc) methodology set out to prove that answers to all those six questions were in the affirmative and, therefore, views of Karl Marx were misleading. They restructured the faith in the said order. The Classical Economists visualized the society composed of three classes: the labourers, the landlords and the industrialists. The interests of those classes were harmonious as well as conflicting - harmonious because in matters of production they must cooperate and conflicting because in matters of distribution they must compete with each other. The Neo-Classical Economists saw that a class-based analysis could not avoid or falsify the Marxian conclusions. Hence, the prime objective of the Neo-Classical School was to dissuade the intelligentsia from class-based analysis of the Classicists. They had to invent a new methodology of analysis - and that was individualism, rather methodological individualism. They combined it with two more theoretical inventions - methodological instrumentalism (it means the supposition that all behaviour is preference-driven or, more precisely, it is to be understood as a means for maximising preference-satisfaction) and methodological equilibrium (presupposition of equilibrium state and the entities hovering around it, instead of demonstrating that equilibrium would emerge as a natural consequence of agents' instrumentally rational choices). In so doing, they had to distance themselves from the reality and they did not mind doing so. Thus grew the body of theories that one calls 'microeconomics'. This endeavour made neoclassical economics dogmatic and religious in nature. The dogmatic nature of Neo-Classicism persisted even after the Keynesian economics came up to rescue economics from an indulgence in the grand academic trivialism, and finally culminated into the so-called Neo-Classical synthesis by an illegitimate internalization of the Keynesian thoughts into the Neo-Classical framework (done, notably, by John R. Hicks and Paul A. Samuelson). Leijonhufvud in his Life among the Econ (1973) characterized neoclassical economics in the most sarcastic manner. Steve Keen in his Debunking Economics: The Naked Emperor of the Social Sciences (2001) argues that neoclassical economics is a degenerative research program, not generating new knowledge but growing a belt of protective auxiliary hypotheses to shield its core beliefs from critique. In spite of the devastating implications of Sonnenschein-Mantel-Debreu theorem (progulmated some 40 years past that micro-economics cannot make a base of any reliable macroeconimc theory or policy), micro-economics has lived and has been selling itself as economic theory.