Received economic theory does deal with preference and choice, but in models which are strictly deterministic and which rest on simplifying assumptions which remove from the scene the distinguishing human attributes of individuality and imagination. It is small wonder that so many of our contemporaries spend their time in refining static and deterministic models and in displaying logical and mathematical virtuosity. One may admire, as one admires the expert who can do The Times and The New Statesman crosswords in a half hour, but one can hardly regard it as useful. It is only when we allow the imaginative process of decision-taking that we may hope to develop a new economic theory which may be helpful in our contemporary society.
Keirstead’s views, in the opening quotation of this chapter, reveal admirably the sterility of mainstream economic theory. Though written two decades ago and shared by a few economists, these views can hardly be said to have influenced the economics profession at large. One of the reasons, perhaps, is that although they identify how economic theory is deficient, criticisms of this nature, and there have been many over the years, have not gone far enough to enable theorists to understand why it is deficient. In order to do that, and to see why and where we have to begin in order to ‘allow the imaginative process of decision-taking’, it is necessary to go all the way down to the methodological foundations of social theory.
In a way, the nature of the predicament of orthodox theory has been known for a long time. Perceptive scholars like Hicks (1976a, 1976b) and Kaldor (1972, 1979) knew that the matter was somehow tied up with equilibrium. Others, like Mises and Hayek, took the view that there was not enough of human action in neoclassical theory. Both assessments were correct, but what was not understood is that the two issues are interrelated