In our downloads section we have placed the newly released issue of PAER. There are several good articles in this issue with, and no offense to JKG, the last article by Peter T. Manicas titled “Endogenous growth theory: the most recent “revolution” in economics?” is worth a read. A fairly dry title I grant, but a good little overview of the history of the development of what Marx might have called Bourgeoisie economic theory, although as Manicas points out, the real bourgeoisie really has no use for neoclassical micro-economics, at least as a science of capitalism.
Most economists acknowledge that their assumptions are false, but take for granted that the model is justified in terms of its putative predictive value. But, sadly, neither do we have predictive power! Economists, like weathermen and stock market analysts, are never without an explanation of a failed prediction. On the other hand, and perhaps remarkably, even among economists, there is doubt as regards the capacity of theory to understand the real world. Davis (2004) concluded that “a majority of AEA members” who responded to a survey he conducted, admitted, “at least privately, that academic research mainly benefits academic researchers who use it to advance their own careers and that journal articles have little impact on our understanding of the real world and the practice of public policy” (359).
Inadvertently this points to the weakness in Manicas’ argument about the evolution of neoclassical economics. It is not enough to simply postulate that economics evolved the way it did because of two core assumptions—methodological individualism and the invisible hand—and their collision with mathematical elegance. This indeed has become the staple explanation among those practicing the history of economics. What needs to be explained is why a discipline that is putatively about capitalism finds so little takers among capitalists and yet remains so well funded by capitalists. It was Rockefeller that founded Chicago, and it was the economics department at Chicago which cleaned up Rockefeller and his class. Herein, I think partially lies, the resolution to our riddle.
“Economics! What is it good for? Say it again! Absolutely everything! Uhm, ah, Say it again ….”(set to the tune of WAR).