Title: How Can We Avoid Closed-ended and Single Exit Theories in Economics and Political Economy: Reflections on Richard Wagner's Mind, Society and Human Action
Abstract:Economics basically begins with two empirical observations. First, individuals pursue their interests. Second, Paris gets fed. And the task of the economist is to reconcile those two observations. In ...Economics basically begins with two empirical observations. First, individuals pursue their interests. Second, Paris gets fed. And the task of the economist is to reconcile those two observations. In one version, the profit maximizing behavior of individuals results in a general competitive equilibrium; in another version, individuals will be alert to those opportunities that are in their interest to be alert to, discovering opportunities for mutually beneficial exchange; and in still another version, the reconciliation fails to result because of any number of human imperfections. The main versions that get played out in public debate over the virtues of not only the market economy but also the discipline of economics itself are the first and third. And both of those are built on closed-ended models of choice and single-exit theories of equilibrium. The first version results in an optimal outcome; the third results in a suboptimal outcome. This scientific vision of economics reached its pinnacle in the 1960s and 1970s with the Arrow-Hahn-Debreu model of general competitive equilibrium and the proof of the first and second fundamental theorems of welfare economics, and its flip-side the pure theory of market failure (as developed by Samuelson, Bator, Arrow, Akerlof, and Stiglitz) focusing on the various implications of imperfect information and imperfect market structure. Ironically, both the model of general competitive equilibrium, and the model of market failure, scarcely paid attention to the institutional environment within which market processes are played out. The first and third versions of the intellectual efforts to square selfinterest with social order while clearly simply being flip-sides of one another,Read More
Publication Year: 2011
Publication Date: 2011-09-17
Language: en
Type: article
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Cited By Count: 1
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