Is this article correct about the relationship of neo-classical economists to 19th century century physics? I think Lion Walras was more likely Leon!
The economist has no clothes: Unscientific assumptions in economic theory are undermining efforts to solve environmental problem - Saturday, April 05, 2008: By Robert Nadeau for Scientific American Magazine
The 19th-century creators of neoclassical economics —the theory that now serves as the basis for coordinating activities in the global market system — are credited with transforming their field into a scientific discipline. But what is not widely known is that these now legendary economists — William Stanley Jevons, Lion Walras, Maria Edgeworth and Vilfredo Pareto — developed their theories by adapting equations from 19th-century physics that eventually became obsolete.
Unfortunately, it is clear that neoclassical economics has also become outdated. The theory is based on unscientific assumptions that are hindering the implementation of viable economic solutions for global warming and other menacing environmental problems.
The physical theory that the creators of neoclassical economics used as a template was conceived in response to the inability of Newtonian physics to account for the phenomena of heat, light and electricity. In 1847 German physicist Hermann von Helmholtz formulated the conservation of energy principle and postulated the existence of a field of conserved energy that fills all space and unifies these phenomena. Later in the century James Maxwell, Ludwig Boltzmann and other physicists devised better explanations for electromagnetism and thermodynamics, but in the meantime, the economists had borrowed and altered Helmholtzs equations.
The strategy the economists used was as simple as it was absurd — they substituted economic variables for physical ones. Utility (a measure of economic well-being) took the place of energy; the sum of utility and expenditure replaced potential and kinetic energy. A number of well-known mathematicians and physicists told the economists that there was absolutely no basis for making these substitutions. But the economists ignored such criticisms and proceeded to claim that they had transformed their field of study into a rigorously mathematical scientific discipline.
Strangely enough, the origins of neoclassical economics in mid-19th century physics were forgotten. Subsequent generations of mainstream economists accepted the claim that this theory is scientific. These curious developments explain why the mathematical theories used by mainstream economists are predicated on the following unscientific assumptions:
* The market system is a closed circular flow between production and consumption, with no inlets or outlets.
* Natural resources exist in a domain that is separate and distinct from a closed market system, and the economic value of these resources can be determined only by the dynamics that operate within this system....
URL1: Http://www.sciam.com/article.cfm?id=the-economist-has-no-clothes
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Posted by: Penney Kome
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