Neoclassical economics focuses so much on decision-making individuals acting for what pays off in competition with each other that it ignores the fact that markets are only a subsystem of the economy. Neglected are the social and moral components that constrain and moderate competition; competition is conflict after all. Three kinds of interactions are needed to prevent market breakdowns: moral prohibitions, social bonds and government rules. The more we fail to recognize their roles and use the neoclassical as a guide for theory and policy the more the market economy is undermined. Markets depend on normative means and internalized values without which the transaction costs of maintaining the markets would simply be prohibitive; without them the system is pushed in an amoral, anarchic direction. The social bonds that integrate the economy are neglected in neoclassicism because the key element, cooperation, is missing. Cooperation, such as in voluntary associations, is a major protection against totalitarianism.
(William R. Waters (1990) "Review Essay: The Moral Dimension in Economics" Review of Social Economy, Spring; 64-5: emphasis in the original)
The dialectical connection between the natural talent for entrepreneurial creativity and the man-made banking structure has a significant policy implication: a nation will prosper depending on the soundness and favorable ambience of its financial sector because there is not much that can be done to develop innovational talent.
(William R. Waters (1993) "A Review of the Troops: Social Economics in the Twentieth Century," Review of Social Economy, Fall: 271)
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Publication information: Book title: Social Economics: Premises, Findings and Policies. Contributors: Edward J.O'Boyle - Editor. Publisher: Routledge. Place of publication: New York. Publication year: 1996. Page number: 107.
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