Toward a New Classical Economics

Writing over at Hackernoon, Arnold Kling writes about a need to “overthrow neoclassical economics.”

Kling’s article rings of truth.  A lot of neoclassical economics, as it is taught and practiced, does tend to simply treat “labor” and “capital” as blobs and ignores the individual believes and attitudes of individuals.  People are reduced to “representative agents” or mere resource-allocators in the standard neoclassical framework.  Firms are treated as mere input-output machines that run by blobs of homogenous things known as “capital” and “labor.”

Kling proposes to insert the ideas of cultural evolution into economics, a proposal I am sympathetic to.  And, at one time, economists took this factor into account.  Adam Smith, David Ricardo, Frederic Bastiat, and many other of the classical economists knew you had to take into account people’s attitudes, desires, sympathies, etc and they acted on these.  Adam Smith’s Theory of Moral Sentiments is a proto-economic book and he discusses at length how our sympathies and morals, shaped and shaping those around us, affect our behavior.  Frederic Bastiat, in The Law and That Which is Seen and That Which is Unseen discuss the role of institutions and how people react to those institutional frameworks if they deviate from their moral foundations.

In a sense, Kling is correct.  We need to overthrow neoclassical economics.  I’d like to see it return, at least insofar as the assumptions concerning homo economicus goes, to its classical roots.

3 thoughts on “Toward a New Classical Economics

  1. Now you’re into some deep thinking, Jon. The greatest ideas in the world don’t go anywhere at all without the support of the right people. We need dreamers, but we also need doers. Sometimes you have to make a decision on which one to use your scarce resources.

    Just as an aside on a tangential point: any labor unions’ main platform is people are assets and not an expense or cost, and everything turns, or is supposed to turn, on that main concept.

    Synergy should not be a buzz word in our team building class. That’s a tough concept to swallow for those who are focused on individualism.


    • “Synergy should not be a buzz word in our team building class. That’s a tough concept to swallow for those who are focused on individualism.”

      This is an excellent point. I agree fully, but I think part of the issue is a misunderstanding of the word “individualism.” It’ll have to wait until a future post for me to expand on, but a lot of people who use this word don’t seem to understand its original meaning. Individualism means treating each person as a person. It doesn’t mean there are only atomistic people. Collectives, like firms, markets, families, etc, are also real things.


    • Walt, one could say that the entire study of economics is mostly a study of synergies between and among individuals and groups of individuals acting cooperatively to improve their levels of satisfaction,

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