The Evolution of Neoclassical Thought

This is illustrated in Landreth and Colander's A History of Economic Thought (2001), which shows that "neoclassical" was originally a derogatory term coined by Thorstein Veblen in critique of Alfred Marshall's theories. In the early 20th century, U.S. economics was more influenced by institutionalism than neoclassical thought. By the 1930s, however, Marshallian economics dominated academic discourse, setting the research agenda centered on marginalist concepts and supply-demand equilibrium.

The transition from Marshallian to Walrasian approaches marked a significant shift, as the focus honed in on marginalism and rationality. By the 1940s, this exploration led to Arrow and Debreu's groundbreaking work on general equilibrium, solidifying the theoretical framework of neoclassical economics.

Yet, the Keynesian revolution of the 1930s introduced a macroeconomic perspective that was fundamentally different, emphasizing aggregate demand over the individualistic principles of neoclassical models. Although Keynesianism faced challenges, by the 1960s, it had gained widespread acceptance.

The subsequent failure of Keynesian models to predict the 1970s inflation led to the rise of new classical economics, which returned to a focus on individual utility but struggled to establish a unified macroeconomic approach.

Modern Economics: A Shift in Methodology

As the neoclassical research project reached its conclusion, the profession evolved towards formalistic and eclectic model-building. Modern economists often employ rigorous mathematical models, moving away from the heuristic approaches favored by earlier thinkers like Alfred Marshall.

Despite this shift, many economists remain entrenched in outdated neoclassical paradigms, as seen in undergraduate textbooks that lag behind contemporary developments. For many economists, dismissing neoclassical economics seems irrelevant, as it has become more of a historical artifact than a current framework.

The coherence of post-neoclassical economics lies not in the content of the models, but in the empirical and quantitative methods employed to produce them. Economists scrutinize problems, create simplified models for empirical testing, and apply their findings back to the issues at hand.

Broad and Narrow Interpretations of Neoclassicism

"Neoclassical" can denote more than just the technical definition embraced by economists; it also reflects the broader infiltration of capitalism into academia. This has transformed what should be independent scholarly pursuits into instruments serving powerful private sector interests, reducing scientific inquiry to propaganda.

While it’s crucial to differentiate between the technical and propagandistic meanings of "neoclassical," one must confront the challenge of understanding how the eclectic model-building approach could also serve the interests of the wealthy.

The intentions of economists may align with social scientific exploration, but this does not negate the possibility that their work could have unforeseen societal implications. It’s akin to historical perspectives that may one day deem past academic pursuits as misguided or self-serving.

The Illusion of Scientific Rigor in Economics

One must scrutinize the claim that empirical model-building in economics is sufficiently scientific to resist the temptation to compromise its principles. Critiques of macroeconometric models suggest that many economists resort to data mining, undermining the validity of their statistical tests.

Landreth and Colander highlight that econometrics often lacks the rigor to substantiate economic claims, as the complexity of macroeconomic phenomena resists controlled experimentation. The reliance on proxies, subjective judgment, and unverifiable variables further complicates the reliability of econometric findings.

The irony lies in how abstract economic discussions often overshadow the tangible realities they intend to address. While rigorous experiments would ideally validate economic theories, the nature of macroeconomics prevents such straightforward verification.

The Role of Propaganda in Capitalism

In this context, the eclectic model-building approach contributes to a broader agenda that aligns with the interests of the affluent. By framing capitalism as a natural, inevitable phenomenon, economists obscure its origins as a human construct shaped by power dynamics.

The historical crises faced by capitalism, including the rise of Marxism and the Great Depression, have prompted shifts in economic discourse. Neoclassical economics has often sought to neutralize Marxian critiques, reinforcing its status as the dominant narrative.

As the need for overt propaganda lessened, particularly following the establishment of the free-market narrative in the U.S., the role of economists evolved. They transitioned from active myth-makers to passive observers, allowing the business community to take the lead in promoting capitalist ideologies.

In essence, while modern economics may eschew overt propaganda, it inadvertently upholds the status quo, failing to challenge the inequities perpetuated by the capitalist system.

The Consequences of Relativism in Economics

The eclectic nature of contemporary economic models contributes to a culture of ignorance, where competing theories yield transient trends rather than cumulative knowledge. This phenomenon of agnotology undermines the discipline's credibility, as new models often negate their predecessors, leading to a net loss of understanding.

The risk of relativism emerges as economists prioritize a diverse range of models at the expense of coherent, unified theories. The division between conservative and progressive economists further complicates the field's scientific status.

Ultimately, whether or not these emerging trends should be labeled "neoclassical" is a semantic issue. What truly matters is the ongoing debate about whether economics has ever been genuinely scientific or if it has primarily functioned as a vehicle for defending the interests of the wealthy.

The first video, Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else, discusses the growing divide between the wealthy elite and the rest of society.

The second video, The PLUTOCRATS: How the Richest 1% Influence the World, explores the influence and power dynamics of the super-rich in shaping economic policies.