Minimal utility of neoclassical economics!

Neoclassical burnishing makes a fictionalised version of actual capitalism

by Kumar David-June 18, 2016, 8:15 pm 

The critique of neoclassical economics that we are familiar with is political and ideological. The villains are strike breaking, union bashing Regan-Thatcher, bigots like Freidrich Hayek who mentored Chile’s military dictator Augusto Pinochet and a privatisation obsessed IMF of structural adjustment infamy. This critique of neoliberalism, which is neoclassical economics spiced with a right-wing political programme, is a passionate rejection of this political ideology.

The book that is up for review today is different, it’s not political, it’s written for economics scholars and explores the fundamental categories on which neoclassical economics is built, that is; ‘rational’ consumers, U-shaped supply curves, flat demand functions and the fiction of an equilibrium at which marginal-utility equals marginal-cost. The author’s scalpel shreds every one of these categories from the inside that is from within economic discourse and using empirical economic data. This book will resonate for a long time.

Capitalism: Competition, Conflict, Crisis; by Anwar Shaikh, Oxford University Press (2016), pp 979, $50 hardcover, makes heavy reading. The prose is turgid, references to published literature profuse, and the inclusion of mathematical sections in text and appendices require familiarity with algebra, a smattering of calculus and a little bit of regression theory. Another matter that makes the going hard, but constitutes the book’s great strength, is the wealth of empirical data that grounds analysis in actually existing capitalism, current and past. In this Shaik reverts to the materialist and empirically grounded approach of the great classical economists; unlike latter day neoclassicals who snatched ideologically loaded delusions out of the theoretical aether.

Shaik, of Pakistani origin, started as a Princeton educated physicist, but mutated to Professor of Economics in the New School in New York. This magnum opus he says has been in preparation for 15 years and I can discern the inputs of graduate students in working through spread-sheets, graphs and computational algorithms. There is no way I can do justice to a 1,000 page tome that’s heavy to even carry around in a 2,500 word review. In any case if I get stuck into detail and derivation I will lose all but the nerdiest of readers. My objective is to explore interesting and controversial arguments but at the same time to try to hold the attention of all who have some grounding in the dismal sciences. I have chosen just three aspects to follow through; Shaik’s demolition of neoclassical economics, his theses on real competition and third his summary of Kondratieff long waves.

Decapitation of neoclassical economics

Read More