Note: I want you all to be highly critical of my posts on factor shares – and where you can throw literature at me. I wrote a bunch of posts in a single day based on one book (and some prior knowledge), I have no appeal to authority here and would love to have your ideas thrown in there 🙂
Just as a starting point here, if anyone comes on and goes “those neo-classical neo-liberals, like Friedman, this is all ideology – I’ve read Klein”, I am not likely to reply. The key reason for this is because you’ve already shown a complete unwillingness to debate on reasonable terms, and are trying to base the discussion on prejudiced definitions that aren’t appropriate for this definition of neo-classical economics.
In this context, neo-classical is a description of economists who applied a certain set of methods at a point in time – economics is a discipline with “many models”, and the development of these tools is of huge value. The start of this method came with the “marginalist revolution”.
The Marginalists in this case were Jevons, Walras, and Menger. Those who work in certain areas will recognise some of the names (eg Walras law, Menger as a founder of the Austrian school of Economics). Fundamentally, the purposefully use of the concept of “marginal” gains and losses (rather than average) allowed us to consider individual choice more directly. More than that, value switched from having “objective” value in its labour time/cost of production to having “subjective” value (potentially on the basis of “satisfaction” or “utility”). Note: This is not to say classical economists didn’t think in this way as well, John S Mill was a student of Bentham and wrote a book called utilitarianism! But the change in focus did help to “solve” many of the perceived paradox of classical economics (eg Giffen goods).
It is no coincidence that at this time sociology and psychology were ramping up as disciplines. With the growing acceptance of the idea of a “science of society” a number of ways of discussing social facts were being described. Within economics, the recognition that it may be useful to think about action stemming from individual choice had found its time, and the mechanistic tools of calculus had a place to help us consider certain assumptions about this choice (methodological individualism) – this compares to the classical use of factor shares, and some prices (wages) being set by social convention.
You will find me say critical things in here, and talk about this literature as a “starting point” to real analysis. So let us consider it in this way. Read more
