> Jim asked how I would teach, instead of neo-classical micro. > > I've asserted that neo-classical is a story. A story, propaganda, > designed and intended to subjagate.
right, though I don't think it was "designed" as much as happened: a bunch of folks really like the calculus and other math and the powers that be were willing to pay them to call it "economics." Much of economics is totally useless to those in power -- even as propaganda, BTW. Is Debreu's THEORY OF VALUE propaganda, or is it intellectual masturbation, the leisure of the theory class? BTW, I'm sure that there are other versions of economics that could be used to subjugate. Is neo-Ricardian or Sraffian economics automatically progressive? A lot of institutionalists and Post Keynesians are very conservative. Etc. > Well, I would tell a different story. The neoclassical story is that firms maximize profits, fight competition by cutting prices, and so you find prices driven down to the MC of the most efficient producer. A wonderful result for consumers.< NC economics allows for non-competitive results with P > MC. Further, and more importantly, intelligent NCs know that the private MC need not equal the social MC, due to externalities. So we might have P = MC as a bad thing. Of course, textbook economics downplays this. But it's there. > Of course that story isn't plausible, even to a lowly freshman. So here's a better one: Firms try to maximize their share price, which means behaving as they think will do that, not competing on price, cooperating and/or colluding with other firms to share markets and keep prices high. This can be taught out of standard Finance texts -- dynamic, rather than static like neo-classical. This story IS plausible to freshmen. And to the Rotary Club, etc. And so the story can talk about exploitation of workers, screwing of consumers, dumping pollution into the air and water.< I doubt that focusing on wealth maximization changes much. Further, the standard NC story can deal with the last, not to mention collusion. What it misses is the way there's an incentive for businesses to actively seek out ways to externalize internal costs (and internalize external benefits). It misses the dynamic, in which the firm is an active agent (an accumulator) rather than a passive recipient of price signals... > The neo-classical story re consumers is similarly implausible to any adult. The story is the one ridiculed by Veblen 100 years ago -- that we are bits of quivering protoplasm reacting to prices and making decisions independent of what everybody else is buying. OF COURSE we are influenced by other people. OF COURSE we learn to like products, develop habits, not to say addictions. We DON"T go up and down a demand curve depending on the price. Either of these changes in the story smash neo-classical micro.< I agree that NC consumer theory is either tautologically true or wrong. However, empirical evidence suggests that in general, if the price of a good goes up, a smaller quantity will be demanded. I've seen the utility-max parable as a third rate effort to explain that empirical fact. We should face the fact that supply & demand do a pretty good job of explaining empirical reality (in a very limited sphere). Even where the assumptions (such as perfect competition) don't apply, S&D work: if the demand for a monopolist's good rises, so will price; if the cost of producing it rises, so will price. Etc. The classical economists -- including Marx -- didn't reject supply & demand. Rather, they saw S&D as a small piece of a large system (as with Marx, who saw S&D leading to the redistribution of value amongst capitals). NC economists take the fact that S&D does pretty well and use it to cover up a lot of the other crap that they purvey: they use it to imply that they're scientists or (if they're Chicago-schoolers) that markets are perfect, etc. > I would tell a different story. It is where we are influenced by others, influenced by advertising, not independent at all. I would use something like Marris' chapter on Demand as a background for myself, and flesh this out for the course. This story would be plausible to students.< Economists outside of Chicago are willing to accept a limited amount of endogenous determination of tastes. They just don't see it as something that can be pinned down to a simple theory and so tell people to study psychology and sociology if they want to understand it. They also point to the phenomenon of one company's advertising being cancelled out by another's. > I have to confess that when I did Micro this way it severely upset the Department and the College and I no longer am in academia. When I was job hunting I was asked "Can you teach Henderson & Quandt?" -- a then high level mathematical micro text. I would reply "I can" not saying aloud the rest of the sentence "but I won't."< Yeah, higher level micro (back then, H&Q) gets involved with math uber alles and gets increasingly utopian. Some of the game-theory stuff allows a little realism. Anyway, I don't see what you're proposing to be that different from what I said, i.e., a cleaned-up version of NC economics (dropping as much of the crap as possible). It fits with Bowles/Edwards UNDERSTANDING CAPITALISM -- or the version of that book by Eric Nilsson -- or with Mayo Toruno's book. Jim D.
