Economic Sociology: Neoclassical Economic Perspective

Abstract

Neoclassical economics is the stage and branch of economic science since the 1870s through the 1930s and beyond. It was mostly the product or sequel of what economists (Schumpeter 1954) call the Copernican marginalist revolution in economic theory during the 1870–90s. Specifically, the crux of marginalism was a marginal‐utility theory of exchange value and its extensions (e.g., marginal‐productivity principle of income distribution) in reaction and contrast to the labor‐cost conception in classical political economy. The founders or pioneers of marginalism are commonly considered to be William Jevons (England), Carl Menger (Austria), and Leon Walras (Switzerland/France), who almost simultaneously in 1871–4 “discovered” marginal‐utility value theory as a putative revolutionary alternative to its labor‐based versions in Smith, Ricardo, Mill, Marx, and others. (For instance, Jevons specifically attacked Ricardo and Mill's theories, prompting neoclassical economists like Alfred Marshall to rise in their partial defense.) The term neoclassical economics was invented by (Thorstein Veblen Groenewegen 1995), a heterodox institutional economist, in the early 1900s to indicate that marginalism (e.g., marginal‐utility theory) was, in virtue of utilitarianism and hedonism, essentially continuous with and so “scarcely distinguishable” from classical political economy (which apparently overlooks the opposition of the marginalist revolution to Ricardo et al.'s labor theories of value). In this sense, the terms marginalism and neoclassical economics become interchangeable, though the first term is probably more accurate and precise for describing this stage and type of economic theory. Moreover, historians of economics such as Schumpeter (1954: 919) object that “there is no more sense in calling the Jevons‐Menger‐Walras theory neoclassic than there would be in calling the Einstein theory neo‐Newtonian.” This suggests that neoclassical economics is essentially marginalism (with partial exceptions like Marshall), but not conversely: the marginalist revolution is not newly, but counter‐classical (that is what makes it presumably “Copernican”).