Dilemmas in Economic Theory Persisting Foundational Problems of Microeconomics

by Mandler, Michael

• ISBN13: 9780195100877
• ISBN10: 0195100875
• Format: Hardcover
• Copyright: 1999-02-25
• Publisher: Oxford University Press

Summary

By examining the development of economics in the 20th century, this book argues that the breakthroughs of post WWII general equilibrium theory and its rejection of utilitarianism and marginal productivity have been misunderstood. Mandler maintains that although earlier neoclassicism deserved criticism, current theory does not adequately address the problems the discarded concepts were designed to solve, and that intractable dilemmas therefore appear.

Table of Contents

1. Introduction: The Transformation of Economic Theory	3	(13)
1.1 Three transitions	4	(3)
1.2 The timing of the transitions	7	(1)
1.3 Theory versus practice	8	(2)
1.4 Where early neoclassical theory fails	10	(1)
1.5 Interest theory: a further blindspot	11	(2)
1.6 Why the history of economic theory?	13	(3)
2. Marginal Productivity and the Indeterminacy of Factor Prices	16	(36)
2.1 Introduction and overview	16	(3)
2.2 Marginal productivity theory	19	(1)
2.3 Initial criticisms of marginal productivity theory	20	(2)
2.4 Nondifferentiable production and indeterminacy	22	(1)
2.5 Alternatives to differentiable production	23	(2)
2.6 Fixed-coefficients theory and its critics	25	(5)
2.7 Long-run theories	30	(7)
2.8 Factor pricing in contemporary theory	37	(9)
2.9 Factor-price indeterminacy revisited: Sraffa and general equilibrium theory	46	(3)
2.10 Conclusion	49	(1)
Appendix	50	(2)
3. The Prehistory of Distribution Theory: The Wage Fund and the Invention of Marginal Productivity	52	(14)
3.1 Overview	52	(1)
3.2 Factor pricing in classical economics	53	(2)
3.3 The wage fund	55	(4)
3.4 J.S. Mill and elastic factor supply	59	(2)
3.5 Between the wage fund and marginal productivity	61	(3)
3.6 The emergence of marginal productivity	64	(1)
3.7 Conclusion	65	(1)
4. The Ordinal Revolution	66	(44)
4.1 Introduction	66	(2)
4.2 Demand analysis and neoclassical economics	68	(4)
4.3 Hedonism and its advantages	72	(4)
4.4 Early neoclassical accounts of deliberation	76	(2)
4.5 Ordinal preference theory	78	(4)
4.6 Ordinalism versus cardinalism	82	(3)
4.7 Diminishing marginal utility and psychological concavity	85	(2)
4.8 Should assumptions be placed only on preferences?	87	(6)
4.9 Convexity versus diminishing marginal utility	93	(3)
4.10 Transitivity and completeness	96	(8)
4.11 Conclusions	104	(3)
4.12 Postscript: choice under uncertainty	107	(3)
5. Historical Issues in Preference Theory: Cardinality and the Transition to Ordinalism	110	(13)
5.1 Cardinality and cardinal measurability	111	(1)
5.2 Cardinality based on pleasure	112	(3)
5.3 The end of hedonism	115	(2)
5.4 Fisher: non-hedonistic cardinality	117	(4)
5.5 The move to ordinalism	121	(2)
6. Paretian Welfare Economics	123	(41)
6.1 Introduction and overview	123	(2)
6.2 Economic utilitarianism	125	(6)
6.3 Early neoclassical definitions of efficiency	131	(3)
6.4 The rejection of utilitarianism	134	(2)
6.5 Bergson-Samuelson social welfare functions	136	(4)
6.5.1 An example: Harsanyi social welfare functions	138	(2)
6.6 Compensation criteria	140	(10)
6.6.1 Hicksian variations: cost-benefit analysis	142	(3)
6.6.2 Output comparisons	145	(5)
6.7 The postwar consensus	150	(3)
6.8 Problems with Pareto optimality	153	(4)
6.9 Policy paralysis: a social-choice example	157	(5)
6.10 Conclusion	162	(2)
7. A Positive Rate of Interest?	164	(27)
7.1 Introduction	164	(3)
7.2 The classical position	167	(3)
7.3 Early neoclassical interest rate theory	170	(5)
7.4 Contemporary interest rate theory and the impatience assumption	175	(5)
7.5 Technological arguments for a positive interest rate	180	(7)
7.6 Land and interest	187	(1)
7.7 Conclusion	188	(1)
Appendix	189	(2)
8. Conclusion	191	(2)
8.1 Anomaly versus norm in theoretical models	191	(1)
8.2 Form and content	192	(1)
References	193	(10)
Index	203