Telling Other Stories:

A Critical Commentary on Neoclassical Micro Principles Texts[1]

The goal of Telling Other Stories is to provide a chapter by chapter critique of micro principles texts that could be assigned alongside a standard text by a "heterodox" instructor, or read independently by an interested student in an orthodox course. The design of the project is similar to Marc Linder's efforts in Anti-Samuelson (1977).

Logic of Critique

The commentary is based on six premises.

1) There is a template, a standard neoclassical treatment of most

topics covered in micro principles courses, which can serve as the target for a generic commentary.

2) Economic theory and principles textbooks are animated by subtexts, that

is, by tacit and unprovable assumptions about the nature of society and by normative ideas about the goals of economic knowledge. Neoclassical and heterodox economics tend to have different subtexts (identified below) and, partially as a result of this, tend to offer different contexts for thinking about

economics and public policy.

3) It is possible to find significant common ground across a broad range of heterodox economists' critiques of neoclassical principles texts, including work by many Marxist, neo-Marxist, radical, institutionalist, feminist, Post Keynesian, Neo-Ricardian, socio-economic, humanistic, and ecological economists.

4) The basis for this common ground is a common set of disagreements with neoclassical theory about methodology and about which working assumptions to make about the empirical character of the economy. While different heterodox paradigms offer different alternatives to neoclassical theory, they take-off from common objections to neoclassical theory.

5) To construct an effective critique of standard texts requires a sustained voice. One of the pedagogical strengths of principles books is the repetition of the same kind of analysis across many different topics, drawing analogies, for example, between the maximizing behavior of consumers and firms, or between input and output markets. To be effective, critiques must offer a competing "habit of mind" or pattern of analogy. To accomplish this end, Telling Other Stories uses the same categories of critique for challenging each neoclassical chapter.

6) While neoclassical principles books present themselves as "scientific" texts and offer their conclusions as deductive results from first principles, which are then tested against empirical data, they necessarily convey their basic message through stories, metaphors, and other forms of rhetoric. Hence heterodox critiques must do more than challenge the formal arguments of neoclassical economics. They must also challenge the "stories" in neoclassical principles texts and offer alternative stories, metaphors, and analogies to convey heterodox ideas.

III) Derived Structure of Critical Commentary

Given the above premises, each chapter in Telling Other Stories is divided into four sections.

Section 1, entitled "template," outlines the topics covered in the standard intro text's treatment of the subject matter.

Section 2, "categories of critique," reviews the text's analysis using heterodox theory's "common ground" objections to textbook economics.

The identification of critiques that could define a common ground among heterodox paradigms is one of the central challenges for the book. I want the categories to capture most of the core ideas of the heterodox paradigms identified above in a way that links the paradigms together and still allows proponents of each paradigm to develop the general category in a paradigm specific way. I would also like the categories of critique to permit easy analogy across chapters of an intro text. The eight categories of critique that seem best able to do this are listed below.

1) epistemological objections to the texts' presentation of neoclassical theory as "the" science of economics (i.e., criticisms of the texts' attempt to command belief for what are "paradigmatic" rather than logical or universal conclusions).

2) objections to the neoclassical subtext, beginning with identification of the subtext and concluding with alternative heterodox subtexts.

3) holist critiques of the texts' methodologically individualistic reasoning

4) dynamic critiques of the texts' basically static analysis

5) objections to the texts' excessive abstraction from concrete details

6) objections to the texts' treatment of uncertainty and disequilibrium

7) objections to the texts' de facto treatment of perfect competition as the norm and background for economic analysis

8) objections to the texts' allegiance to homo economicus[2]

Section 3 of each chapter, "rhetorical critique," applies the above critiques to the stories told, metaphors used, and analogies drawn in the corresponding neoclassical chapter and offers alternative herterodox stories and metaphors in their stead. Section 4, "summary," weaves together many different strands of heterodox critique into an alternative picture of the subject matter and briefly explores the public policy implications of this view.

IV) Objections to Neoclassical Subtexts.

Because of the central role played by subtexts in the design of principles texts I'd like to end this brief introduction to the thinking behind the Critical Commentary project with a longer explanation of the concept of subtexts.

By “subtext”, I mean the tacit assumptions underlying neoclassical analysis and the projects motivating it. Appendix 1 list thirteen that seem especially important. I’ll focus on two here: (1) The assumption that the goal of economic analysis is to facilitate economic efficiency and economic growth, and (2) the linked assertions that perfect markets do this best, real world markets do this reasonably well,[3] and policy makers attempt this with great difficulty.

The paradigmatic and normative dimensions of these subtexts (e.g., the elevating of efficiency over equity concerns, and market over non-market activities) are obscured in SN behind a positivist façade. Critiquing this subtext is tricky. SN’s initial focus on the concepts of scarcity, efficiency, opportunity costs, exogenously given tradeoffs, production possibilities frontiers, etc. is offered as a common sense way to “set the table” for economic analysis. But it is more than this; it’s putting the table in a particular room (the marketplace), taking people’s appetites as exogenously given, deflecting attention from other potential subjects, and so forth.

In the critical commentary I will illustrate why micro principles texts can be defined as much by what they aggressively exclude as by what they include. By introducing the ideas of political-economists like Fred Hirsch and Richard Easterlin early in the critique, by noting that economies produce people and distributions of power as well as goods and services, that capitalism creates as well as meets needs, etc., I hope to demonstrate the bounding and delimiting of economic discussion attempted in the early chapters of neoclassical texts.[4]

Let me illustrate what I mean by “sub”texts and tacit assumptions more concretely with a different and relatively minor example. In Chapter 1, SN write, “In the United States and most democratic countries, most economic questions are solved by the market” (8). The word “democratic” is a red herring here. It has no analytic function, but suggests (without any logical or empirical argument) that democratic peoples prefer markets, or that markets lead to democracies, or perhaps that the absence of markets leads to dictatorships, etc. . The meaning is murky, but the subtext is clear, markets are good. The question of the relationship between political and economic systems is an important one, but the treatment here is ideological rather than analytical.

The specificity of neoclassical subtexts can be illuminated by identifying the alternative subtexts and tacit assumptions in heterodox paradigms. Among these are: a skepticism about capitalism and a desire to explore its full societal implications; a greater concern for equity issues than is common in neoclassical thought; a skepticism about the ability of market exchange to meet the full range of human needs, and a concern about the dangers of capitalism exhausting the environment. These concerns generate a different agenda for principles courses than that found in standard texts.

Appendix 1: Neoclassical Subtexts

Among the most important subtexts of neoclassical theory are the following claims:

1) Neoclassical economics (NEC) is a scientific theory with claims on belief similar to modern physics. While economists disagree at the margin on some issues, there is widespread agreement on the basic principles of neoclassical economics. NEC is a positive theory, normative issues are the province of other disciplines.

2) Markets and capitalism are natural.

3) People are naturally greedy and markets permit the harnessing of self

interest in the service of the common good. Capitalism is successful, in part, because it offers an incentive system that builds on “human nature.”

3) Markets are spheres of rationality, freedom and voluntary exchange.

Political environments promote special interests and irrational behavior. (This latter claim is not exercised too hard.)

5) Capitalism is statically efficient, and static efficiency should be a major social goal in our inevitable battle with naturally given scarcity. Price signals marginal social cost on the supply side and marginal social benefit (measured by willingness to pay) on the demand side.

6) Capitalism is dynamically efficient (though this isn’t formally argued).

7) The primary goal of economic policy should be to promote economic growth, as growth provides the basis for solving all of our problems (elimination of poverty, resolution of egalitarian pressures (through access to a larger pie), resources for redressing environmental problems, promotion of world peace, solution to population pressures through demographic transition, etc.

8) A key aim of public policy should be to promote perfect market outcomes and address equity issues (subject to the equity/efficiency tradeoff).

9) People receive from markets what they (or the factors they own)

contribute. Redistribution (of endowments or final goods) shrinks the pie. Whether to redistribute is an ethical question, separate from economic science.

10) While many of the assumptions of General Equilibrium Theory (homo economicus, perfect competition, perfect information, Says Law, etc.) are unrealistic, the world is close enough to the idealized picture to infer the characteristics of a capitalist economy from the idealized model. (Another version of this claim implies that markets come “closest” to idealized general equilibrium outcomes rather than “close to” idealized outcomes.)

11) The state is basically a technocratic instrument for pursuing democratically chosen objectives, though it may be captured by special interests on many occasions.

12) The demise of the former Soviet Union proves socialism can’t work.

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[1] (For a general overview of the book project see working paper #6 at: http://ase.tufts.edu/gdae/).

[2] In the critical commentary I will also review the standard chapter's adequacy for understanding women's experience in the economy and environmental issues. These topics, however, are not addressed in this paper.

[3] Characteristically, the move from perfect to real markets is accomplished with the wave of a “magical hand”.

[4] Debates over the definition of economics offer one venue for this kind of analysis. Feminist economists have been especially helpful here. GDAE’s new principles text, Microeconomics in Context has a very effective chapter criticizing neoclassical texts for conflating intermediate goods (such as GNP or aggregate consumption) with final goods (human well-being). Their text calls for discussion rather than assumption of what constitutes human well being and economic success.