Abstract
The paper deals with the debate on the General Economic Equilibrium (GEE) in the 1930s in Vienna and at the London School of Economics and offers an interpretation of it different from that of the traditional narratives. It interprets the debate as a renewed confrontation between the two different classical methodological paths of research in GEE, the Paretian and the Walrasian ones. What emerges from this examination is a picture of different approaches and theories in competition, in particular on the issue of the relationship between theory and the real world. This was the fundamental issue at stake. Herein lies also the interest in those distant controversies for the current debate in economics.
Highlights
The mathematicians of the Kolloquium rejected the Kreis’s “physicalism” and tended to downplay the importance of the verificationist paradigm. These different philosophical conceptions were reflected in different conceptions of economic theory: a conception of economics as empirical science supported by the Wiener Kreis; and a conception of economics as a mathematical science supported by the Mathematische Kolloquium
Wald recognized that “in many areas of mathematical economics very substantial abstractions are being used, so that one can hardly speak of a good approximation to reality”, but he defended the adoption of “far-reaching abstractions” using some arguments that had already been used by some mathematical economists of past generations - i.e. that “mathematical economics is a very young science” and “economic phenomena are of such a complicated, involved nature that far reaching abstractions must be used at the start merely to be able to survey the problem”
As regards Hicks, his theoretical project had the explicit ambition of bridging the gap between statics and dynamics in the General Economic Equilibrium (GEE) model, thereby resolving the sterility of the classical model and the impasse in which it was trapped, but still remaining within the Paretian analytical and methodological framework
Summary
Paretian economics had a dominant influence on the development of neo-classical microeconomics in the English-speaking world in the 1930s (Marchionatti 2006). A few years later, he and Allen wrote their famous article “A Reconsideration of the Theory of Value” In 1933, some LSE graduate students had founded the Review of Economic Studies, a journal which contributed greatly to acquaintance with Pareto in the UK and published many articles on Paretian themes (see Marchionatti 2006). 3) was considered “a beginning” to be developed along the new lines laid down by Slutsky, Allen and Hicks, implicitly reintroducing the successive approximation approach which the late Pareto de facto abandoned. Hicks’s book was the most ambitious outcome of this neo-Paretian approach
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