Session proposal for the 16th Annual AISPE Conference
Bologna, 11-13 April 2019
Fracture and integration in economics. Methodological perspectives and lessons from the history of economic thought.
History of economics is rife with divergences between competing approaches, followed, in some cases, by synthesis and assimilation, in other cases, by one approach prevailing over the others. The case of general equilibrium in the twentieth century is paradigmatic under both respects. Starting as one among several strands in economic thought, general equilibrium, in its Neowalrasian form, gradually prevailed over competitors, sidelining some of them (e.g. Austrian economics) and finding compromises with some of the others (e.g. Neoclassical synthesis of Keynesian thought, DSGE). As this process took place, turning dynamic Neowalrasian general equilibrium into the cornerstone of mainstream economics, it introduced a major fracture in the history of economic thought, while presenting itself, and being perceived by many, as a simple ‘extension in a dynamic direction’ of the traditional theory.
Dvoskin and Trabucchi reflect on this issue, focusing on Hicks’s Value and Capital and the foundations of the Neowalrasian approach. Among other results, they find that, contrary to what Hicks himself has claimed, the Neowalrasian theory does not appear to be based on an intended relationship between theoretical variables and observable magnitudes that is significantly different from the one that can be found in traditional economic theory.
Over time, the general equilibrium approach found fruitful applications in all fields of economics, from Welfare theory to Finance, relying on the key concepts of rationality as constrained optimization and competitive market equilibrium. On the downside, propensity to ignore (or take short cuts around) certain fundamental analytical problems and refusal to acknowledge scientific status to the solutions to those problems, coming from the heterodox front, go some way towards explaining current divisions between that front and mainstream economics. At the same time, the heterodox front itself abounds with divisions between and within different approaches.
The paper by Trezzini and Pignalosa exemplifies fragmentation of the latter kind, focusing on the differences (and possible reconciliation) between the two main approaches to the concept of the normal degree of capacity utilization in demand-led growth theory. Similarly to Dvoskin and Trabucchi, albeit in a different context, Trezzini and Pignalosa show how the need to affirm one’s position may lead to controversial results, whose establishment overshadows the existence of a common ground.
On a different and more general methodological level, attempts to find a common ground, going beyond existing divisions, underlay recent some recent proposals for unifying the social sciences, originating within the economics profession. The paper by Ambrosino, Cedrini and Davis, explores and compares the three main proposals in this field as well as their potential impact on pluralism in the social sciences at a time of pervasive specialization, continuous creation of scientific research niches and declining cross-science research programs.
Capital, competition and equilibrium. Value and Capital and the foundations of the Neowalrasian approach.
Ariel Dvoskin* and Paolo Trabucchi**
* Universidad Nacional de San Martín
** Dipartimento di Economia, Università Roma 3, Italy
Abstract
By abandoning the condition of a uniform rate of profit, the Neowalrasian approach has introduced a major fracture in the history of economic thought. And yet this approach was originally presented in the 1930s, and has since been generally perceived, as a simple ‘extension in a dynamic direction’ (Hicks, 1934) of the traditional theory. It appears therefore that a necessary preliminary step in order to take a position on today’s dominant economic theory is to go back to the origins of the Neowalrasian approach and, in particular, to Hicks’ Value and Capital (1939). What we find by so doing is (a) that, contrary to what Hicks himself has claimed, the Neowalrasian theory does not appear to be based on an intended relationship between theoretical variables and observable mag-nitudes that is significantly different from the one that can be found in traditional economic theory; and (b) that, owing to its treatment of capital, in order to establish that relationship the Neowalrasian theory has to introduce as necessary (albeit not sufficient) conditions assumptions on the functioning of the market which the theory itself feels should only be introduced as expository devices. For this exchange between necessary conditions and expository devices, by itself a considerable obstacle in the way of a clear perception of the nature of the theory, we find evidence starting from the Neowalrasian literature immediately subsequent to Hicks up to the textbook (Mas Colell, Whinston and Green, 1995) that in the last twenty years has been the almost indispensable starting point for advanced studies in economic theory.
The normal degree of capacity utilization: the history of an ambiguous concept
Attilio Trezzini and Daria Pignalosa*
*Dipartimento di Economia, Università Roma 3, Italy
Abstract
In demand-led growth theories, the concept of normal capacity utilization has played a crucial role, because different theories are characterized by different positions regarding the relationship between the normal degree of utilization and the actual degree associated with theoretical positions used for the analysis of growth. Despite its importance, however, few studies have actually provided a clear definition and an in-depth analysis of the determination of the normal degree of capacity utilization. By reconstructing the history of these analyses, the present paper identifies two main approaches at the issue, although the analyses included in each of them differ in relevant respects and sometimes originate from rather distant theoretical frameworks. The first approach addresses the determination of the normal degree of utilization taking into account the different levels of production expected during the life time of installed capacity (Steindl, 1952; Ciccone, 1986) and, in particular, assuming that firms aim at satisfying peaks of demand. Capacity is determined in relation with these peaks and the planned degree of utilization results as an average of the different degrees expected during the whole life of the plant. However, the contributions within this approach lack an analytical description of the profit maximization process of the firm. A second position conceives, instead, the determination of the normal degree of capacity utilization as the choice of technique that minimizes costs in relation to a single level of output (Marris, 1964; Kurz, 1986; Shaikh, 2009). Most of the analyses within this approach assume a given level of output. This implies a particular way of taking into account the possible fluctuations of demand. While recognizing that both approaches present some advantages and some deficiencies, we try to identify the origins and the implications of the differences. Our conclusions pave the way to an attempt at reconciling the two approaches.
Unity of Science and Disunity of Economics
Angela Ambrosino*, Mario Cedrini*, and John B. Davis**
* Dipartimento di Economia e Statistica “Cognetti de Martiis”, Università di Torino, Ita-ly
** Marquette University and University of Amsterdam
Abstract
Unity of science has been a very popular topic in history. The twentieth century saw the development of a radical version of this vision, the project of unified science advanced by logical positivists of the Vienna circle, and a series of attempts to build unity on a model of theory-reduction. Critics of this strategy, however, have opposed such efforts – and successfully illustrated the somehow mythical nature of the underlying logic – by emphasizing the irreducible plurality of sciences and the resulting, fundamental disunity of science. The significant difficulties associated with defending convincingly any “unity-of-science” project on traditional bases (ontological, theoretical, or methodological reduction unification) directed the attention of both supporters and critics towards more flexible versions of unity (such as the proposal of unification as “regulative ideal”) and the theoretical and practical foundations of interdisciplinarity – unity being seen in terms of integration between different disciplinary approaches.
Some recent proposals for unifying the social sciences have originated within the economics profession. Our aim is to investigate the reasons why economists are increasingly debating on this issue, and the (theoretical) feasibility of such projects, in the light of the current state of the relationships between economics and contiguous disciplines. In particular, the paper focuses, adopting a comparative perspective, on three main “integration” projects, with a view to throwing light on their theoretical underpinnings and expected outcomes: 1. David Colander’s (and others’) idea of a transdisciplinary social science, based on cross-fertilization of methods and approaches; 2. arguments advanced by influential philosophers of social sciences and economics (like Don Ross, Harold Kincaid) that regard disciplinary adaptation (of economics to sociology and psychology, and vice versa) as possible solution to the unsolved problem economics has with the “social” dimension; 3. Gintis’ proposal for a new theoretical framework using the evolutionary perspective and game theory as bridges for unifying otherwise incompatible disciplinary approaches to human behavior.
While throwing light on the features of disciplinary relations as conceived in each of these projects, we speculate about these latter’s “implicit” origins, which we generally identify in the disunity characterizing the current fragmented state of economics. We then discuss the potential impact of the integration projects by focusing on the issue of pluralism in both social sciences – which some proposals explicitly want to counteract – and in particular within economics, at a time of pervasive specialization, continuous creation of scientific research niches and declining cross-science research programs.
Mario Cedrini