This is an excellent summary of neo-classical economic theory: "According to many Western economists, the answer was simple: the mechanism was too clumsy. In this telling, the problem had to do with the “invisible hand,” the phrase Adam Smith had used only in passing, but which later writers commandeered to reinterpret his insights about the role of prices, supply, and demand in allocating goods. Smith had originally invoked the price system to explain why market economies display a semblance of order at all, rather than chaos — why, for example, any desired commodity can usually be found conveniently for sale, even though there is no central authority seeing to it that it be produced.
But in the late nineteenth century, Smith’s ideas were formalized by the founders of neoclassical economics, a tradition whose explanatory ambitions were far grander. They wrote equations representing buyers and sellers as vectors of supply and demand: when supply exceeded demand in a particular market, the price dropped; when demand exceeded supply, it rose. And when supply and demand were equal, the market in question was said to be in “equilibrium” and the price was said to be the “equilibrium price.”
As for the economy as a whole, with its numberless, interlocking markets, it was not until 1954 that the future Nobel laureates Kenneth Arrow and Gérard Debreu made what was hailed as a momentous discovery in the theory of “general equilibrium” — a finding that, in the words of James Tobin, “lies at the very core of the scientific basis of economic theory.” They proved mathematically that under specified assumptions, free markets were guaranteed to generate a set of potential equilibrium prices that could balance supply and demand in all markets simultaneously — and the resulting allocation of goods would be, in one important sense, “optimal”: no one could be made better off without making someone else worse off."
Tobin, “lies at the very core of the scientific basis of economic theory.”
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CB: postmodernist, polysemic use "lies."
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> On Jan 4, 2016, at 12:30 PM, Charles Brown <cb31450 at gmail.com> wrote:
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> https://www.jacobinmag.com/2012/12/the-red-and-the-black/
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