Peter Radford — Some Issues Re-visited

Hmmm.

It seems that some people misunderstood my comments regarding neoclassical economics.

Allow me to reiterate and, perhaps, clarify.

I want to say that I regard neoclassical economics as a triumph. A wonderful achievement. Brilliant.

Please read the fine print: that brilliance has nothing to do with relevance, reality, or any other such yardstick.

All I am saying is that within its own confines, with regard to its own rules, and with respect to the limits placed upon it by its multitude of excellent practitioners, neoclassical economics has been an extraordinary success.

Further, and more to the point, I am saying that the number of instances of economies we find within the space of all possible economies described by neoclassical economics is tiny. So tiny we are unlikely ever to experience one.

So tiny that neoclassical economics, triumph or not, can be regarded as insignificant as having valid application to the vast majority of instances within that space.
It is thus a triumph, but a useless triumph.

Neoclassical economics may be an intellectual tour de force, the restrictive assumptions imposed for tractability preclude achieving a representational model and consistent realism of results.

That actual economies require a different economics, a better understanding of human behavior, and a less weird description of business, does not detract from the intellectual achievement of the people who built the neoclassical system. It simply means that their effort is irrelevant. It means we all need to stop picking holes in something that, by its own measures, is a great success, and that we ought, instead, build something else. Something that stands up to a more rigorous set of standards.

Something that, in other words, requires rigor not to mask irrelevance and insufficiency, but, rather, to reflect the instances of economic activity we are likely to encounter. Rigor as elucidation not rigor as obfuscation ought guide us.

It is time for us to stop taking the easy route of simply picking at the strange world posited by the neoclassical thinkers, and to start replacing it.

Peter Radford is not an academic economist but rather operates in the real world of firms. He is saying that relevant modeling is based on a theory whose definitions and assumptions are realistic. A scientific theory, of which the model is an articulation, is presumed to be a causal explanation of initial conditions and what happens through change over time based on observable invariance that enables prediction by testing hypotheses generated as theorems in accordance with rules that articulate causality in the model.

The problem with neoclassical economics is that firms do not exist and operate in the ways that neoclassical economics assumes. Furthermore, there are unstated assumptions presumed about the environment in which firms operate that is also unrealistic in that it ignores relevant institutional arrangements that influence operations.

All models are fictions to some degree in that they are simplifications. The goal is maximal simplification using Occam's razor without over-generalizing and oversimplifying. Neoclassical economics is an oversimplification that pretends to be a general theory based on equilibrium.

The Radford Free Press
Some Issues Re-visited
Peter Radford