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Neo-classical theory of competition or Adam Smith's hand as mathematized ideology

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  • McCauley, Joseph L.

Abstract

Orthodox economic theory (utility maximization, rational agents, efficient markets in equilibrium) is based on arbitrarily postulated, nonempiric notions. The disagreement between economic reality and a key feature of neo-classical economic theory was criticized empirically by Osborne. I show that the orthodox theory is internally self-inconsistent for the very reason suggested by Osborne: lack of invertibility of demand and supply as functions of price to obtain price as functions of supply and demand. The reason for the noninvertibililty arises from nonintegrable excess demand dynamics, a feature of their theory completely ignored by economists.

Suggested Citation

  • McCauley, Joseph L., 2001. "Neo-classical theory of competition or Adam Smith's hand as mathematized ideology," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 299(1), pages 294-298.
    • Handle: RePEc:eee:phsmap:v:299:y:2001:i:1:p:294-298
    DOI: 10.1016/S0378-4371(01)00308-9
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    References listed on IDEAS

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    1. Landes, William M & Posner, Richard A, 1989. "An Economic Analysis of Copyright Law," The Journal of Legal Studies, University of Chicago Press, vol. 18(2), pages 325-363, June.
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    Cited by:

    1. Reyes Calderón, 2004. "Fron Neo-classical Entrepreneur to Socio-economic Organization," Faculty Working Papers 01/04, School of Economics and Business Administration, University of Navarra.

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