David Ellerman - Putting Jurisprudence Back Into Economics: What is Really Wrong With Todays Neoclassical Theory

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For over a century, the basic jurisprudence of the system of property and contract that underlies the market has been squeezed out ofor incorporated only in metaphorical terms inneoclassical economic theory. Neoclassical microeconomic theory is not only the basis for the high prestige of neoclassical theory, but it also provides a sophisticated ideological defense for the current economic system based on the hiring, renting, employing, or leasing of persons, the employment system. Most critiques of neoclassical microeconomic theory, orthodox or heterodox, conservative or progressive, also ignore the underlying jurisprudence and are instead based on criticizing the theory as being abstract and idealized, not descriptive of economic realities. For instance, neoclassical microeconomic theory focuses on the perfectly competitive model when the reality falls far short of that model. Such empirical criticism is not our purpose here. Our purpose is to spell out what is really wrong with the theory both descriptively (i.e. conceptual, not empirical, mistakes) and normatively. The criticism is based on questions of normative and positive jurisprudence and on neoclassical theorys sins of omission and commission concerning the underlying system of property and contract, not the system of market prices.

The purpose of this book is to present an integrated jurisprudential critique of neoclassical economic theory. In terms of the division between micro- and macro-economic theory, it is the microeconomic theory that is unified, that has the greatest scientific prestige, and also provides the most scientific ideological foundation for the current economic system. Separating the science from the ideology is part of our task.

The word theory is important. Almost all the orthodox or heterodox critiques of neoclassical economics are based on pointing out the rather obvious, if not completely trite, fact that the idealized microeconomic theories are not descriptive of realityso our purpose is not to reiterate that refrain. Our purpose is also not to point out whats wrong in [macro] economics after the crisis of 20072008 (Skidelsky ). In contrast, our purpose is to point out what is really wrong with todays neoclassical microeconomic theoryhereafter referred to as just neoclassical theory. On the descriptive side, our focus is on conceptual mistakes in the theory, which are even clearer due to the idealized nature of the theory.