critique of microeconomics

rakesh bhandari djones at
Thu May 23 02:38:53 MDT 1996

I sent this out to the progressive economists' line.  I thought some here
may find it helpful.

There is a very powerful brief criticism of neoclassical microeconomics by
Carchedi in Alan Freeman and Guglielmo Carchedi, eds. Marx and
non-equilibrium economics. Brookfield, VT: Edward Elgar, 1996.

Here are some examples:

"Since individuals can only react to given prices and prices changes
(according to the demand and supply curves model), the aggregation of
individual behaviours (that is of the individual demand and supply curves)
cannot explain price formation.  Neither the individual nor the collective
demand and supply curves can explain the formation of prices, including the
equilibrium ones."

"But the determination of the downward sloping demand curve is not only
circular, it is also based on a dubious argument: if the quantity consumed
increases, consumer satisfaction (marginal utility) decreases and with it
demand.  This is certainly possible.  However, first, this applies at most
to people as consumers.  The capitalists' demand for means of production
and labour power can in no way be explained on these grounds.  In times of
economic expansion, the more the means of production and labour power are
consumed, the more they are demanded.  In tiems of economic depression and
crises, the opposite is true.  Secondly, even in the case of individual
consumers, under capitalism an increase of the quantity consumed of a
certain good can only be achieved throuhg an increase in the purchasing
power allocated ot that good.  Thus, the lower demand with an increase in
the quantity consumed can be the result of 'the fact that with increasing
purchaes the purchasing power at the disposal of the buyer or demander
declines' (Linder 1977...)rather than being the result of the lower MU(a).
This is certainly the case for the great majority of the world population,
the poor of the world." Internal quote is from Marc Linder's two volume

"There are many objections which can be raised agaisnt general equilibrium
analysis.  The most one is that the method of simultaenous equations
cancels time.  Instead of there being a determination of the prices of the
production factors (inputs) at time t(1) and of the prices of the products
(outputs) at time t(2), the prices of the inputs and of the outputs of the
*same* production procution process are determined simultaneously....By
seeking refuge in general equilibrium analysis, neoclassical economics
retreats even more from, rather than rooting itself more deeply into, the
real world."

"To sum up, the social content of partial equilibrium theory is its
functionality for the reproduction of the capitalists' system at the
ideological level, its theorization of an economic system (1)excluding
classes, and thus the production of value and surplus value (2)postulating
a mythical, masculine rationality as the natural form of human rationality
(3)assuming equal power in exchange relations based on equal economic
endowments (4)operating on the basis of the most rational and equitable
price, that is distribution system (5)tending towards equilibrium and (6)
reducing specific, that is capitalist social relations, to a historical
utility relations between individual and things thus misrepresenting the
former as the "natural" form of economic relations."

The following essay by Paolo Giussani in this volume attempts an internal
critique of the foundations of neo-classical economics.

I think it would be helpful if students were also introduced to the
problems in value theory. From what I have read, there is no better place
to begin than  Robert Heilbroner's "The Problem of Value" in *Behind the
Veil of Economics* (New York: Norton, 1988)

Rakesh Bhandari
UC Berkeley

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