The nature of economics and the failings of the mainstream: lessons from Lionel Robbins’s Essay

Lionel Robbins, in his famous Essay on the Nature and Significance of Economic Science, correctly showed that the task of economics is to develop, step by step, a realistic comprehension of the economic system based upon the abstract starting point of a theory of value. His mistake was to think that the marginal utility theory of value can be, and was actually in the process of being, developed in a concrete and realistic direction. In fact, marginal utility theory has not to this day been developed in a concrete and realistic direction, and ironically one can find in Robbins's cogent exposition of marginal utility theory the reason why it is impossible to do so. This reason is not primarily methodological (attachment to equilibrium, to formalism or some such), philosophical (attachment to 'positivism') or ideological (pro-capitalist bias), rather the reason is theoretical. Specifically, marginal utility theory can provide no comprehension of the macroeconomic aggregates that drive the reproduction and development of the economic system. The implications for contemporary economics are clear: utterly unrealistic 'toy models' will persist in economics until an alternative value theory is adopted that is able to justify macroeconomic aggregation. These implications ironically bring into consideration the very labour theory of value that Robbins had argued to be usurped by marginal utility theory. Copyright 2012, OUP.