ABSTRACT
This chapter will be dealing with the shift from the classical notion of political economy to the notion of neoclassical economics.1 As previously stated (see Introduction), the notion of political economy was a direct derivation of the influence of classical liberalism during the modern age; neoclassical economics, raised at the end of the nineteenth century and developed during the twentieth, has been the root of the so-called neoliberalism which emerged during the post-modern age. There are as many substantial differences between political economy and
economics, as well as between classical liberalism and neoliberalism. The popularization of the notion of neoclassical economics is deeply rooted in Lord Robbins’ definition of economy as ‘the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses’ (Robbins 1932, 16). Gary Becker gave the ultimate definition of neoclassical economics, when he defined its key characteristics: maximizing behaviour, market equilibrium, and stable preferences (Becker 1976). The road from Robbins to Becker in considering economics ‘predominantly
as a science of choice’ (Williamson 2002) has been long, though. After an intense period of methodological transformations, and a geographical transition from European academia to the most prominent universities in the United States, neoclassical economics reached its status of mainstream within the discipline in Samuelson’s comparative statics (Samuelson 1947) as well as in Friedman’s definition of economics as a positive science (Friedman 1953). Both Samuelson’s and Friedman’s methodological positions are grounded in the rational choice theory as the best framework to understand the formalization of individual and social economic behaviour. In order to explain this process of transformation, it is important to
describe the rise of marginalism as the first step for transforming a political science dealing with the wealth of a nation to a formal science focused on describing individual and social rational behaviour.2 It is also essential to define the building and the reinforcement of neoclassical economics in Europe during the 1930s (Düppe and Weintraub 2013). Finally, it is fundamental to clarify that the transition from institutionalism to neoclassic economics in the
United States (Morgan and Rutherford 1998) had been influenced by the migration of European economists in the late 1930s (Weintraub 2002). The historical framework of the interwar period in Europe, where totalitarian
regimes spread, allows understanding of the development of economics as a formal science, as a value-free discipline. The formalization of the discipline within general economic equilibrium theory as well as the introduction of econometrics, during those two decades, were not only instruments to reorganize the scientific nature of the economic theory; they were also formidable tools used by European economists to avoid any political and even personal relations with totalitarian regimes (Leonard 1998, 2010). During the cold war, American economists, mainly at the University of
Chicago, definitely shaped the discipline into what today is neoclassical economics and endorsed the Western political model, based on that model, presenting it as the most rational and efficient system, able to increase social progress and individual freedom (Christ 1994; Emmett 2009a; Schliesser 2010). As previously stated, although both neoclassical economics and neoliberalism
have been presented as renewed forms of classical economy and classical liberalism, there are some crucial differences between them: the nature of the market as well as the meaning of individual freedom are the main examples of their idiosyncratic relationship. Classical doctrines looked at the market as an institution that enabled a
higher division of labour, as a necessary condition to increase the wealth of a nation. Neoclassical economics and neoliberalism consider the market as the only natural institution that enables relations amongst rational agents. The theoretical strength of rational choice theory has gradually converted this vision into an anthropological dimension that found its outcome in the rise and the development of neoliberalism (see Chapter 3).
