I have spent a reasonable amount of time focusing on how neoclassical economics frames issues, rather than critiquing it purely from an empirical or logical perspective. I expect the response of some is simply: so what? Framing issues in a certain way can be analytically useful: governments versus markets can help us decide whether a bigger or smaller state is required; presenting information asymmetry and the like as imperfections and studying them one at a time allows for clearer analysis; presenting the economy as a separate entity allows us to approach it from a purely analytical perspective.
Maybe I agree with the sentiment, but my problem is that the way neoclassical economics is framed plays in the hands of the status quo, and thus allows for reactionary and populist rhetoric that will inevitably win the debate, having framed it in the first place. It also affects the behaviour of ordinary people – any one familiar with reflexivity will agree that the way we model and structure the system will affect how participants behave inside it.
The problem is the whole idea of the economy or ‘market’ as a separate entity, free from legal or historical context, and self-equilibrating, at least in the long run or with a few tweaks. This makes it easy to reject progressive ideas/reform – why would anybody want to tamper with a system like that? It doesn’t matter that the actual conclusions of neoclassical economics – should you study it – are fairly moderate; what matters is the way that certain legislation is presented as interventionist, whilst existing structures are ignored as ‘natural’.
This way of presenting issues appeals to a couple of human biases – firstly, status quo bias; humans have an innate inclination to stick with the current state of affairs and fear change. By presenting the current state of affairs as natural and self equilibrating, this is strengthened. It also interacts with the just world hypothesis - if people’s income is their productivity, if ‘the market’ is formed by people’s preferences whilst the ‘government’ the forcefully imposed on them it is fairer to leave things as they are, as even if the outcomes seem to be unpalatable, they are just.
I have spoken before about how I think presenting the economy as a complex, non-equilibrating system would alter perceptions and help us manage it. Not only this, but I expect it would change the average man on the street’s perceptions. You might think I’m overstating my case, but consider: since the Reagan-Thatcher ‘revolution’, there has been a massive change in social values – people are behaving more selfishly; there is a general idea that the rich and poor are deserving of their lot; work is, in many ways, written off and instead we focus on consumption.
Neoclassical framing strikes me as a damaging way of looking at the world, skewing debate and altering people’s behaviour towards socially undesirable outcomes, and protecting the status quo as some sort of inevitable or natural state (not to mention that neoclassical economics can’t see outside capitalism itself). The government policies that help the rich are hidden, which leads to articles like this, that play into the hands of the wealthy by speaking of ‘managed’ markets versus ‘unmanaged’ ones. Perhaps if our views weren’t so skewed by neoclassicism, it would be obvious that markets are currently managed in favour of the rich.