The language of economic theory, like any language provides a framework for thought: but at the same time it constrains thought to remain within that framework. It focuses our attention; determines the way we conceive of things; and even determines what sort of things can be said…. A language, or conceptual framework is, therefore, at one and the same time both an opportunity and a threat. Its positive side is that (one hopes) it facilitates thought within the language or framework. But its negative side arises from the fact that thought must be within the framework.
In the epigraph to this chapter, Alan Coddington uses the apposite metaphor of theory as a language in order to explain why it is important to examine the nature of one’s theory and to determine whether the theory is appropriate. On the face of it, neoclassical theory appears to be a very useful and versatile language. It is the pre-eminent language of economists and is applied to a host of practical problems from education to the location of industry. In spite of its widespread acceptance, however, over the past two decades and more, orthodox economic theory has been the subject of sustained critique in what is generally known as the ‘crisis in economic theory’ (see Bell and Kristol 1980 for an early assessment).
A common complaint, even from people well versed in neoclassical economics, is that the theory is ‘unrealistic’ or ‘highly abstract’, although when pressed on the matter they may find it difficult to pinpoint the source of their dissatisfaction. It is also sometimes said that economists have two types of theory, a formal one and one that they use to explain practical problems. The implication being that the formal language is not suitable for dealing with practical matters, and yet it remains the lingua franca of economists and is used almost exclusively and universally for teaching economics. One object of this book is to identify the source of the