On October 21st, I put up a post on this blog, entitled "Dyspepsia," that managed to be self-pitying and self-congratulatory all at the same time -- not a bad trick. On October 27th, "Magpie" responded by going to box.net, reading one of the lengthy essays I had posted there [and to which I referred so praisingly in my Dyspepsia post], and leaving a comment that concluded with a question. Now, six days later, I am finally getting around to responding. Not exactly instant communication, but I have been busy obsessing over the election.
The essay in question is entitled "Critique of Keynes," and Magpie's question was, roughly, Why do I classify the economic theories of the classical political economists [Smith, Ricardo, Marx] as Microeconomics? An important question, which I shall do my best to answer.
Microeconomics is the attempt, starting with a set of assumptions and facts about individual consumers and producers or firms, to deduce or compute certain facts about the economy as a whole, such as the relative prices at which commodities exchange, the economy-wide rate of profit, the rate of economic growth of the entire economy, the physical size and corresponding value or price of the social surplus, and the share of the social surplus received by each of the three great economic classes in the society -- workers, entrepreneurs, and land owners.
Both classical Political Economy and the marginalist theories introduced in the 1870's by Walras, Jevons, and Menger are, in this sense of the term, microeconomic theories. They differ in certain important respects with regard to the assumptions with which they begin [and consequently with respect to the sort of mathematics they use], but they both qualify as "microeconomic" precisely in the sense that the reason from facts and assumptions about individual consumers and producers [i.e., small facts or micro facts] to conclusions about the economy as a whole.
The principal difference between the assumptions of the classicals and the assumptions of those who came to be called neo-classicals is that the classicals adopt the simplifying premise that at any time there is only one technique of production for each commodity, whereas the neo-classicals assume the availability of an infinity of alternative techniques, differing from one another in such a fashion that they can be conceived as varying continuously [hence as amenable to the ministrations of the Calculus.]
Is that any help?
