Eric - I wouldn't spend a lot of time on the capital critique, but it is worth a mention. The fact that the 'other side' conceded defeat (Samuelson 1966) and it still didn't stop the theory from being used can support the argument that the continued dominance of mainstream economics may be due to factors such as ideology, institutional lock-in, etc.
I am not convinced by your unemployment remarks. Of course neoclassical theory has a theory (more than one, actually) of how unemployment can occur, but that doesn't mean that many models that rely on the full employment assumption don't collapse when that assumption is violated. The factors that would generate unemployment also upset the other results (that the outcome is 'optimal' etc.). So, when there is unemployment, free markets don't result in the best of all possible worlds. I think the famous comments by Hahn the GE model are also very powerful. I don't have the quote in front of me, but he says that the most important function of the model is its 'negative' one. It shows that even in theory prices only truly reflect scarcity when there are complete markets including futures markets, no money in the system, perfect information and foresight, full employment, etc. so that any time someone is arguing, for example, that if we are worried about exhaustible resources all we have to do is let the price mechanism do the trick, then one can point out that the person is assuming all the assumptions of the GE model. -----Original Message----- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]] Sent: Thursday, February 13, 2003 6:11 PM To: [EMAIL PROTECTED] Subject: [PEN-L:34715] RE: re: What is wrong with the mainstream economics? Mat wrote, >Perhaps one of the most easily expressed and understandable critiques of mainstream economics is that so many of its results rely on the full employment assumption. . . I'm not sure that is exactly true for applied labor models in which "unemployment" does occur. Because of this, I don't think that an attack via the full employment assumption of non-labor models will have much of an effect. I'm not sure, but it seems the introduction of unemployment in mainstream GE models wouldn't be too hard to do. Beckers allocation of time work is completely consistent with people not working but whining that they really want jobs (but don't take them). Among the many different mainstream approaches to unemployment are the oppportunity costs of working are too great (lazy workers!) and the labor extraction models. And the capital controversy is so 1960/1970s. (It didn't have an effect then and there is not reason to suppose it will have an effect in the 2000s. Eric .
