Academic journal article Erasmus Journal for Philosophy and Economics

Late Neoclassical Economics. the Restoration of Theoretical Humanism in Contemporary Economic Theory

Academic journal article Erasmus Journal for Philosophy and Economics

Late Neoclassical Economics. the Restoration of Theoretical Humanism in Contemporary Economic Theory

Article excerpt

Review of Yahya M. Madra's Late Neoclassical Economics. The Restoration of Theoretical Humanism in Contemporary Economic Theory. New York: Routledge, 218 pp.

At the turn of the century, Colander (2000) announced the death of neoclassical and the birth of the new millennium economics. The term neoclassical, Colander argues, is a good description of economics around 1900, but it no longer offers an accurate account of contemporary 'modern' economics. According to Colander, the term neoclassical economics died when (i) modern economics discarded six of its core attributes, and (ii) replaced them with the new millennium economics. This transition has taken neoclassical economics in two distinct directions: one direction is experimental economics and evolutionary game theory; the other direction is complexity theory. Similarly, Davis argues that these new fields "share relatively little in common either with each other or with neoclassical economics" (2006, 1).1 Colander and Davis thus agree that contemporary mainstream economics is pluralistic.2 In Late Neoclassical Economics: The Restoration of Theoretical Humanism in Contemporary Economic Theory, Yahya Madra (2017) counters these arguments and offers an alternative narrative of the past and present state of neoclassical economics. He also further examines the current state of neoclassical economics in relation to heterodox economics.

According to Madra, neoclassical economics has not been displaced-rather, it is thriving as it exploits recent challenges that reaffirm its core proposition, what he calls theoretical humanism (TH). TH is based on two fundamental presuppositions: the first concerns the status of the economic agent, which is a rational, autonomous, self- transparent, and self-conscious individual; the second concerns the search for harmony between individual and social wholes as articulated in the concepts of aggregate rationality and equilibrium. Madra's main thesis is that the new fields that emerged from neoclassical economics (those listed above) also share these two presuppositions. Throughout the book, he identifies these new fields as late neoclassical economics, which is defined as the period which followed the post-war neoclassicism, circa the 1970s.

The present state of neoclassical economics is a reaction to the failure of the Arrow-Debreu general equilibrium (A-DGE) axiomatic approach to provide analytic foundations for the discipline. such foundations were to arise from proofs of existence, uniqueness, and stability of market equilibrium, "from the ground up from individual rational agents" (13).3 Specifically, late neoclassical economics has three identifying characteristics: (i) it is unified yet heterogeneous; (ii) it is a continuity of A-DGE in its attempt to reconcile individual and social rationality; and (iii) it is a response to the failures of A-DGE.

Madra builds his argument in four parts and ten chapters. Part I offers a summary of the argument and an outline of the Marxist perspective that he draws upon. Part ii deals with the problem of structuralism in neoclassical economics (Chapters 3, 4, 5) whereas part iii focuses on a selection of late neoclassical topics and how they reaffirm TH (Chapters 6, 7, 8, 9). Part IV concludes (Chapter 10).

In chapter 1, Madra argues that although contemporary mainstream economics is diverse, it is a partial pluralism that ignores heterodox economics, specifically those approaches that reject TH. Before 1970, neoclassical economics encompassed theories that differed methodologically, ontologically, and politically from each other; however, below the surface, all were committed to TH. Madra argues that the failure of A-DGE-that is, the failure of the second TH presupposition-is misinterpreted by Colander, Davis, and Bowles & Gintis (2000) as a break between post-war neoclassicism and contemporary mainstream economics. He argues that this narrative is misleading because it conflates neoclassical economics with A-DGE and fails to account for other neoclassical traditions including the MarshallChicago pragmatic partial equilibrium approach. …

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