ABSTRACT
Frank Hahn (Addleson 1986:4) reduces neoclassical economics to three elements. They are reductionism or the ‘attempt to locate explanations in the actions of individual agents’, an acceptance of ‘some axioms of rationality’ as a basis for theorizing about agents, and the view that ‘some notion of equilibrium is required and that the study of the equilibrium state is useful’. Under this broad definition and given a loose interpretation of the ‘equilibrium state’, the methodology that we shall employ in our restatement of the liquidity preference theory of interest could be classified as neoclassical. And yet, in many respects it departs from the mainstream neoclassical theorizing that one finds in leading journals.
