Neoclassical economics’ canonical theorems undercut each other’s core claims.

Evidence

Third, it would appear that the corporeal solidity of a live intellectual discipline would be indicated by consensus reference texts that help define what it means to be an advocate of that discipline. Here, I would insist that undergraduate textbooks should not count, since they merely project the etiolated public face of the discipline to the world. But if we look at contemporary orthodox economics, where is the John Stuart Mill, the Alfred Marshall, the Paul Samuelson, the Tjalling Koopmans, or the David Kreps of the early twenty-first century? The answer is that, in macroeconomics, there is none. And in microeconomics, the supposed gold standard is Andrew Mas-Collel, Michael Whinston, and Jerry Green (Microeconomic Theory), at its birth a baggy compendium lacking clear organizing principles, but now slipping out of date and growing a bit long in the tooth. Although often forced to take econometrics as part of the core, there is no longer any consensus that econometrics is situated at the heart of economic empiricism in the modern world. Beyond the graduate textbooks, the profession is held together by little more than a few journals that are designated indispensable by some rather circular bibliometric measures, and the dominance of a few highly ranked departments, rather than any clear intellectual standards. Indeed, graduates are socialized and indoctrinated by forcing them to read articles from those journals with a half-life of five years: and so the disciplinary center of gravity wanders aimlessly, without vision or intentionality. The orthodoxy, so violently quarantined and demarcated from outside pretenders, harbors a vacuum within its perimeter. … Fourth, and finally, should one identify specific models as paradigmatic for neoclassical economics, then they are accompanied by formal proofs of impeccable logic which demonstrate that the model does not underwrite the seeming stolidity of the textbooks. Neoclassical theory is itself the vector of its own self-abnegation. If one cites the canonical Arrow-Debreu model of general equilibrium, then one can pair it with the Sonnenschein-Mantel-Debreu theorems, which point out that the general Arrow-Debreu model places hardly any restrictions at all on the functions that one deems “basic economics,” such as excess demand functions. Or, alternatively, if one lights on the Nash equilibrium in game theory, you can pair that with the so-called folk theorem, which states that under generic conditions, almost anything can qualify as a Nash equilibrium. Keeping with the wonderful paradoxes of “strategic behavior,” the Milgrom-Stokey “No Trade theorem” suggests that if everyone really were as suspicious and untrusting as the Nash theory makes out, then no one would engage in any market exchange whatsoever in a neoclassical world. The Modigliani-Miller theorem states that the level of debt relative to equity in a bank’s balance sheet should not matter one whit for market purposes, even though finance theory is obsessed with debt. Arrow’s impossibility theorem states that, if one models the polity on the pattern of a neoclassical model, then democratic politics is essentially impotent to achieve political goals. Markets are now asserted to be marvelous information processors, but the Grossman-Stiglitz results suggest that there are no incentives for anyone to invest in the development and refinement of information in the first place. The list just goes on and on. It is the fate of Delphic oracles to deal in obscurity. — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 70

Categorization

• XREF: Connects to the broader argument about the orthodoxy’s internal fragility that the reader is tracing through this book’s thought-collective analysis — and to critiques like McCloskey on models’ rhetorical emptiness. — connects to: Contemporary orthodox economics lacks the consensus texts that define a stable discipline — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 68; Formal neoclassical theorems undermine the very principles the theory claims to establish — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 70
• DEEPTHINKING: The climax of the chapter’s argument: each canonical pillar of neoclassical theory comes with a proof showing the theory doesn’t deliver what it promises — a genuinely dense, paradigm-reshaping list that undercuts the orthodoxy from within.