The relation of neoclassical economics to other disciplines

Abstract

Since the emergence of the classical school, the scientific ideal of the physical sciences has been a constant influence on the economic theory and its method. Its influence is still present in contemporary neoclassical economics. Similar to the case of physics, classical economists were very open in incorporating psychological elements into the economic discourse. This openness toward psychology continued with prominent marginalist economists, such as Jevons and Edgeworth, who were eager to draw from psychological ideas found in earlier authors. In the first decades of the 20th century, a major conceptual change in economics took place and this is also known as the Paretian turn. This conceptual change, initiated mainly by Vilfredo Pareto and completed in the first decades of the 20th century by J. Hicks, R. Allen, and P. Samuelson, attempted to remove all psychological notions from the economic theory. The legacy of the Paretian turn can still be identified in the significant reluctance of the contemporary orthodox economic theory to incorporate the findings of the new behavioral economics, a field with a discernable psychological bent. This chapter argues that the history of the relationship between the two subjects just mentioned and economics can lead to some potentially useful observations concerning the nature of contemporary neoclassical economics. It will also be maintained that the relationship between neoclassical economics and physics ultimately constrained its interaction with psychology. JEL codes B10; B40; A12; D90