The Banal Insanities of Neoclassical Economics
There is a sort of economic thought, you see
found all throughout the mainstream variety.
They endlessly construct models and theories,
but the correctness of these ideas is never a query.
“The assumptions here,” they generally say,
“are not important in any real way.
The predictions we make,
or the rules that we break,
are there to create the predictions we take.”
As long as our results seem right and the math all looks nice,
who cares how we got there, whether by virtue or vice?
The result of these notions,
and the models they set in motion,
are a set of views that should rightly cause quite the commotion!
Even though they serve as their foundation,
they resemble the world in not a single relation.
I’ll list a few of these for your own reading,
so that you may understand the absurdity I’m meaning.
They assume that man acts in perfect rationality,
but this term has a particular meaning, you see.
This man maximizes his utility
he optimizes his annuities
and don’t even think about any sort of gratuity
He searches for pennies on the street,
and dimes hidden in the sheets.
His one single end and never-ceasing motive
is to raise his income and always promote it.
Never mind the immaterials of life,
music and art, love or strife.
No thought at all for things that are fine,
because homo economicus thinks only of the bottom line.
But the inanities do not cease there my friend
as ridiculous as is their view of men.
They have their idea of Perfect Competition
which I believe is certainly worthy of mention.
In this strange world, the price of goods is the same,
from store to store, and from name to name.
Every single unit is identical to the last,
and no change at all in the future from the past.
To them, this is perfection! Amazing! The best!
But it appears confounding to us, all the rest.
There is no competition in this perfection of theirs,
only firms all working in lockstep all selling wares.
If no difference is found in each unit of goods,
then no competition exists! It never truly could!
For firms to compete, they must be unique.
This much is obvious, for those who bother to *think*.
Perfect Competition is imperfect indeed,
and is clear to all who are outside their creed.
Even so, we have not yet reached the end
(It is understandable to think this is all beyond mend).
We are all familiar with the shrewd entrepreneur,
but their economics has no room for such a figure!
The problems of production and all functions and numbers,
and no room for the businessman and the work he encumbers.
Given revenues and costs, optimization is easy.
But the real world isn’t so simple, believe me.
Entrepreneurs organize, build, and choose,
not just follow functions and rules.
They have to see what doesn’t yet exist,
and in order to make it real, they take all the risk.
The future is uncertain, and always is so.
Tomorrow’s events we can never truly know.
Production is not just an arithmetic problem.
Plans are dynamic; you can’t just solve them.
Neoclassicals see him as all but absent,
but the businessman’s function is a crucial talent.
We could go on to the rest of the Neoclassical fallacies,
but we would have not the room for all of these tragedies.
For the sake of space (as well as my sanity),
We will cap our list at only these three.
But to you, dear reader, I give you the choice.
To which ideas go your heart, mind, and voice.
The Neoclassical notions of man, markets, and business,
or to their commonsense opposites that we all do witness.