A Follow-Up: a Conceptual Distinction

Regarding my previous blog post, the following conceptual distinction might prove useful in how we look at what modern orthodox neoclassical economics is doing via its core general equilibrium theory of a perfectly competitive market economy.

To help us with this, consider the following comparison. (My example comes from the Keynesian-Marxist economist John Weeks.) The concept of a horse stands for real horses in nature. It's a general and abstract concept which stands for all the basic and common features shared by all horses in the real world of nature, like having four long sturdy legs with solid hoofs, a long vertical neck when standing up and/or running, a flowing mane and tail, and is a plant-eating animal. Of course, this concept of a horse leaves out all the specific features that belong to the many different individual horses roaming on the planet, such as differences in the colour of their coats and eyes, their teeth and hoofs, and their heights, etc. Nevertheless, on the basis of this general and abstract concept, we are able to pick out instances of real horses in the world of nature, despite the multiple distinguishing features that exist between them. Thus, our concept of a horse, while general and abstract, and (it must also be said) is not a literal description of some Platonic 'horse'  in the realm of 'Ideas', is nonetheless grounded in the real world of nature. It's not an imaginary conception of something. It actually refers to all those creatures in the natural world which display horse-like features. It is therefore a realistically based concept.

What about the concept of a unicorn, for a comparison? It too is a general and abstract concept which stands for not only all those 'creatures' with horse-like features but also 'those' with a single straight horn projecting from their forehead, which is what essentially distinguishes 'them' from horses in general.  The obvious difference is that while we might grasp what the concept of a unicorn stands for (its sense or meaning), it does not actually describe or refer to any real creature in the world of nature. (This is a very Lockean way of discussing things.) Consequently, unlike the concept of a horse, it is not grounded in the real world of nature; in short, it's not based in reality. In fact, it's nothing more than a fictitious concept since it's based on an imaginary figure - 'the unicorn'.

So, in light of this comparison between the two abstract, general concepts of a horse and a unicorn, we can distinguish between two types of abstract concepts: those which are realistically based and those which are non-realistically based. The former can simply be called realistic concepts while the latter can be called unrealistic or fictitious concepts.

With this conceptual distinction in mind, how should we view the conceptual status of the underlying assumptions of the core general equilibrium theory of modern orthodox neoclassical economics?

Well, we would have to say that they (ie, assumptions like rational economic agents and perfect competition) are nothing more than a bunch of fictitious abstract concepts rather than realistic ones, since they do not refer to anything that's actually real in the world of a capitalist market economy. Consequently, the core general equilibrium theory of modern orthodox neoclassical economics is based on a bunch of abstract fictitious concepts, similarly to how a fairytale about unicorns is based on a fictitious notion of something.

Despite what's been said here, there is (as is well known) a ready made methodological defence of the so-called scientific approach of modern orthodox neoclassical economics: the 'as if' defence of Milton Friedman in his 1953 essay, 'The Methodology of Positive Economics'. In future blog posts, I will discuss this methodological defence of modern orthodox neoclassical economics.