What use is economic theory? Mainstream as a component of the political economic model

Abstract

What use is neoclassical mainstream? Criticism of mainstream practical applicability by heterodoxies is not weakening. But the mainstream is heterogeneous, it includes orthodox neoclassical mainstream (Walras, Keynes, Friedman), the subject — “the wealth of nations”, the method — a mathematically descriptive method without explanations and the Marshallian version — with the same subject and method, but with explanations from the standpoint of individual behavior. The regularities of the objective neoclassical mainstream (demand curve, equality of savings to investments, etc.) are irrefutable, but its practical applicability is limited by the descriptive method. The potential of the mainstream can be revealed if it is re-incorporated into the classical two–factor model “nature-form” (nature according to Smith — “purchasing power”, according to Marx — “value”; form — good, use value), in which the descriptive method is supplemented by an explicative one. This is a classic model at a new level, consistent with genomics (the product is not an “economic cell”, but an “economic DNA molecule”). The model differs from the heterodox “Marxist political economy” in subject matter and method. This is the “new orthodoxy” which can be called “applied political economy”, since it includes analysis, forecasting and application in business practice.