Date: Sat, 07 Aug 1999 12:32:37 -0400
Subject: Re: BHA: irrealism and economics


Hi Bwanika, i am not entirely certain of context of your comments, it
sounds like 
you refering to a paper you have written toward a critique of mainstream 
economics?   and the main ideas you seem to be taking issue with i take
to be
the following:


(a) "a very strong disparity between theory and practice"
(b) "perfect markets"  which is better understood as the relative
efficacy of markets, 
     and neo-classicals believe markets in general to be highly
efficient.  that is
     movement of prices tend to clear markets, i.e. suppliers are able
to find demand, 
     with the fluctation of price.
(c) the notion of equilibrium
(d) prefect information and rational choice theory

with respect to the disparity between theory and practice, of course
this is very 
important.  but neo-classicals don't necessarily see this as a problem,
in that
they make a very sharp distinction between positive and normative
theory, thus they maintain
there exists a hiatus between theory and practice.  whereby for example
they can argue that
inefficiencies of markets, markets that should and could be efficienct,
are caused
by misguided policy, maybe a policy that cause prices to be "sticky" ...
for example
minimum wage laws, the wage as a price for labor is not allowed to
fluctuate, and as a
consquence the market doesn't clear, hence we have unemployment.  hence,
if theory is
out of phase with reality, so much worse for reality.
 
this is a very simple example, but neo-classical don't see theory and
practice inconsistencies
as necessarily being a major problem.  likewise the lack of relevance of
neo-classical theory 
propably the main critique of mainstream theory has not phased, or
penerated the hard-core...

so even pointing out that there have never existed "perfect markets" is
not necessarily seen 
as a critique, most neo-classicals would not deny this.  and they can
easily work in notions
of imperfect markets, or imperfect competition, such as monopolistic and
oligopolic competition.  
indeed they do have a very heavy presence in neo-classical theory.  they
further take in account 
that the price system may not clear markets when there exists
externalities 
(e.g. polluation from a factory).

neo-classical themselves question the existence, stability and
uniqueness equilibrium, propably
the equilbrium metaphor can be argued not to be the central issue, in
that perhaps the theory 
could exist without it ...

the idea of perfect information is a most recent development to deal
with things like (Keynesian) 
uncertainty, the openness of reality, etc.

the defense of mainstream theory as turned toward the virtues of
irrealism.  that scientific
theorizing is instrumentalist by character, so for example, Gary Becker
argues something
to the effect that perfect information is the logical corollary to
rational choice theory.
This is instrumentalist, not meant to be realistic.  Further, and more
general Milton Friedman argued 
something along the lines, that the more irrealistic are the assumptions
the better the theory.  
whereby the success of theory and explanation depends on the success of
prediction, the 
Achilles Heel of neo-classical theory, in that their prediction success
is one of constant 
conjunction of failures.  the main response as been the immuturity of
the science, and that 
economists just need to 'try harder',as Mark Blaug as argued, to adhere
to (pre-1985) Popperian 
conception of (deductive) science. 

Now it seems to me that this has been the importance of the critical
realist contribution to
the critique of neo-classical dominance.  As Lawson argues following
Bhaskar, science is not 
deductivist in structure, and with the notion of the stratification of
reality, prediction cannot
be measurement of success.  based on the distinction between open and
closed systems, successful 
explantion does not necessarily led to successful prediction.  Lawson
achieves an explanatory critique
of mainstream theory, but not a sustained ideological critique.

It seems to me you are more interested in the latter.  However, i don't
think that the point of entry is
from the lack of irrealism, neo-classicals don't deny this, the point of
entry may very well be where
Lawson has left off, from his methodological explanatory critique.

Hans D.


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