ABSTRACT
The journey from the old marginalism of Alfred Marshall to the general equilibrium theory of Kenneth Arrow and Gerard Debreu involved the negotiation and renegotiation of what might diplomatically be termed a number of compromises. First, in a reaction against utilitarianism, especially in the formal terms of maximising utility, the pursuit of self-or economic interest is perceived to be confined to a limited range of activities and to comprise only a limited part of human motivation. Second, a corresponding core of universal economic laws, derived deductively from basic propositions, has to be set against the moderating influence of other factors and specific historical circumstances to be established inductively. Third, the passage from partial to general equilibrium, and from micro to macro, leaves unaddressed a major part of systemic functioning of the economy, for which political economy, old institutionalism and/or Keynesianism offer an antidote. Fourth, this is all part and parcel of a perceived lack of realism concerning the applicability of marginalism beyond a certain point (Milonakis and Fine 2009, ch. 14).
