History of Economic Thought

TLDR: In this article, the authors make a distinction between historical and historical analysis in the context of neoclassical economics, arguing that historical analysis is limited to the goods and services that were typical products of competitive capitalism.

Abstract: individuals. In a classical paradigm, the concept of class is more useful than individual agents in analyzing social phenomena. In this way, classical economy has roots in holism, and accommodates social categories like class. Usually the neoclassical economics is firmly grounded on a research program of methodological individualism, which generally posits that individuals with given preferences and endowments, and firms with given technologies, enter the market process as autonomous entities. Indeed, the adherence to the tradition of methodological individualism has an important bearing on the nature of the neoclassical model. For neoclassical economists, society is the collection of individuals. Individual wants, thoughts, and deeds combine to make society what it is. To understand an economy is then to make sense of the aggregate effects of individual wants and acts. Neoclassical theory does this by demonstrating how individuals maximize their material self-interests by utilizing their resources and the available technology in market transactions. What happens in an economy is always explained as the result of individuals acting in this way. The economy, as neoclassical economists theorize it, is the aggregate end product of individuals. Historical vs. Ahistorical In classical economics tradition, historical analysis is called for and mathematical models and statistical investigations are of limited usefulness. The classical economists have made consistent efforts to explain the rise of the capitalist mode of production in terms of historical analysis. They from the beginning have sensed that it was the essence of capitalist production to generate an accumulating surplus, and that the manner of this accumulation was crucially related to the character of the newly emerging social relations of capitalist society. The classical theory of value would be limited to the goods and services that were typical products of competitive capitalism. They regarded the explanation of this historical phenomenon as their primary task. Instead of the characteristic features of a given socioeconomic system, the starting point of neoclassical economics is the ahistorical individual and therefore the neoclassical theories are expressed in mathematical models which exclude the concept of history. For example, in neoclassical traditions, there are only factors of production, namely, labour, land and capital, each of which receives a reward commensurate with its productivity. There are no essential differences among them. This shows the lack of the notion of class which is unique to the stage of capitalist society. This methodological features arises from the fact that though the great themes of classical economy are dynamic and developmental, the great themes of neoclassical economy are static and allocational.