Contending Economic Theories: Neoclassical, Keynesian, and Marxian (MIT Press)

Contending Economic Theories: Neoclassical, Keynesian, and Marxian (MIT Press)

Richard D. Wolff

Language: English

Pages: 424

ISBN: 0262517833

Format: PDF / Kindle (mobi) / ePub

Contending Economic Theories offers a unique comparative treatment of the three main theories in economics as it is taught today: neoclassical, Keynesian, and Marxian. Each is developed and discussed in its own chapter, yet also differentiated from and compared to the other two theories. The authors identify each theory's starting point, its goals and foci, and its internal logic. They connect their comparative theory analysis to the larger policy issues that divide the rival camps of theorists around such central issues as the role government should play in the economy and the class structure of production, stressing the different analytical, policy, and social decisions that flow from each theory's conceptualization of economics. The authors, building on their earlier book Economics: Marxian versus Neoclassical, offer an expanded treatment of Keynesian economics and a comprehensive introduction to Marxian economics, including its class analysis of society. Beyond providing a systematic explanation of the logic and structure of standard neoclassical theory, they analyze recent extensions and developments of that theory around such topics as market imperfections, information economics, new theories of equilibrium, and behavioral economics, considering whether these advances represent new paradigms or merely adjustments to the standard theory. They also explain why economic reasoning has varied among these three approaches throughout the twentieth century, and why this variation continues today--as neoclassical views give way to new Keynesian approaches in the wake of the economic collapse of 2008.

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new focus on the individual as the ultimate source or essential cause of society and of thought. Humanism positioned the individual at the center of (and as the essence of) the universe, rather in the manner that previous religious thought had seen God in that place. In effect, a human essentialism displaced the earlier divine essentialism. As the German philosopher Ludwig Feuerbach put it, “God did not create man; it was the other way round.” 1.2.2 The New Economic Theories The transitional

class process from feudal to capitalist. His became a class theory of society. It made sense of how societies worked and changed by (1) identifying the class processes in that society— how and where surpluses were produced and appropriated and (2) showing how those class processes influenced the economy and society in which they occurred. Marx’s focus on class in surplus terms sharply differentiates him from the neoclassical economists who are generally disinterested in class, deny that a surplus

indicated by AB in the diagram. According to neoclassical theory, the proper solution is for money wages to fall from w0 until that excess labor supply of AB becomes zero at the equilibrium wage, w1, in the diagram. Whatever so-called unemployment remains at that equilibrium wage may be thought of either as transitional in nature or as strictly voluntary. The former idea indicates the possibility of temporary unemployment due to an individual’s being in transition from one job to another. The

the price level in a society. Stated differently, the question is, What determines the position of the aggregate-demand curve in figure 3.3? The neoclassicists answer this question by specifying a new equation in which price level is related to the money supply. Keynesian Theory Commodity price level (P ) 113 S P2 P1 D (M2) D (M1) 0 R Y1 Total real output (Y R ) Figure 3.3 Neoclassical aggregate-supply and aggregate-demand curves The Fisher, or Cambridge, equation thus completes our

business even could rise. The individual investor’s human nature in the Keynesian world is far different from what it is in the neoclassicist’s world. For Keynes, human nature in an inherently uncertain world generates a moody and erratic investor who oscillates between periods of business euphoria and those of depression. Clearly, this is a very different nature than that posed by the neoclassicists with their carefully crafted assumptions of human rationality enabling all agents, including

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