Dilemmas in Economic Theory Persisting Foundational Problems of Microeconomics

by Mandler, Michael

• ISBN13: 9780195145755
• ISBN10: 0195145755
• Format: Paperback
• Copyright: 2001-03-29
• 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.

Author Biography

Michael Mandler is an Associate Professor of Economics at Harvard University.

Table of Contents

Introduction: The Transformation of Economic Theory	p. 3
Three transitions	p. 4
The timing of the transitions	p. 7
Theory versus practice	p. 8
Where early neoclassical theory fails	p. 10
Interest theory: a further blindspot	p. 11
Why the history of economic theory?	p. 13
Marginal Productivity and the Indeterminacy of Factor Prices	p. 16
Introduction and overview	p. 16
Marginal productivity theory	p. 19
Initial criticisms of marginal productivity theory	p. 20
Nondifferentiable production and indeterminacy	p. 22
Alternatives to differentiable production	p. 23
Fixed-coefficients theory and its critics	p. 25
Long-run theories	p. 30
Factor pricing in contemporary theory	p. 37
Factor-price indeterminacy revisited: Sraffa and general equilibrium theory	p. 46
Conclusion	p. 49
Appendix	p. 50
The Prehistory of Distribution Theory: The Wage Fund and the Invention of Marginal Productivity	p. 52
Overview	p. 52
Factor pricing in classical economics	p. 53
The wage fund	p. 55
J. S. Mill and elastic factor supply	p. 59
Between the wage fund and marginal productivity	p. 61
The emergence of marginal productivity	p. 64
Conclusion	p. 65
The Ordinal Revolution	p. 66
Introduction	p. 66
Demand analysis and neoclassical economics	p. 68
Hedonism and its advantages	p. 72
Early neoclassical accounts of deliberation	p. 76
Ordinal preference theory	p. 78
Ordinalism versus cardinalism	p. 82
Diminishing marginal utility and psychological concavity	p. 85
Should assumptions be placed only on preferences?	p. 87
Convexity versus diminishing marginal utility	p. 93
Transitivity and completeness	p. 96
Conclusions	p. 104
Postscript: choice under uncertainty	p. 107
Historical Issues in Preference Theory: Cardinality and the Transition to Ordinalism	p. 110
Cardinality and cardinal measurability	p. 111
Cardinality based on pleasure	p. 112
The end of hedonism	p. 115
Fisher: non-hedonistic cardinality	p. 117
The move to ordinalism	p. 121
Paretian Welfare Economics	p. 123
Introduction and overview	p. 123
Economic utilitarianism	p. 125
Early neoclassical definitions of efficiency	p. 131
The rejection of utilitarianism	p. 134
Bergson-Samuelson social welfare functions	p. 136
An example: Harsanyi social welfare functions	p. 138
Compensation criteria	p. 140
Hicksian variations: cost-benefit analysis	p. 142
Output comparisons	p. 145
The postwar consensus	p. 150
Problems with Pareto optimality	p. 153
Policy paralysis: a social-choice example	p. 157
Conclusion	p. 162
A Positive Rate of Interest?	p. 164
Introduction	p. 164
The classical position	p. 167
Early neoclassical interest rate theory	p. 170
Contemporary interest rate theory and the impatience assumption	p. 175
Technological arguments for a positive interest rate	p. 180
Land and interest	p. 187
Conclusion	p. 188
Appendix	p. 189
Conclusion	p. 191
Anomaly versus norm in theoretical models	p. 191
Form and content	p. 192
References	p. 193
Index	p. 203
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