How Economists Can Accept Shackle’s Critique of Economic Doctrines Without Arguing Themselves Out of Their Jobs

The methodology of mainstream neoclassical economics deals with knowledge deficiency problems in a deterministic manner and as ‘refinements to the theory of economic action rather than rudiments of it’ (Coddington 1975: 151). For Shackle (1972), such an approach to the subject is unacceptable, since its deterministic nature is fundamentally at odds with his argument that, to be meaningful, choice must make a difference to the unfolding skein of events. Central to his view of the nature of choice is clearly a rejection of the concept of equilibrium and of the assumptive fiction that co-ordination is achieved, on a once-and-for-all basis, via the costless efforts of an omniscient auctioneer. If choices are meaningful in Shackle’s sense, the skein of events contains many surprises, many incentives for agents to rethink their views of things and change their behaviour. For example, the workings of a multiplier process falsify expectations and these surprises may then spark off euphoric or depressing super-multiplier effects. In markets for financial assets, ‘bulls’ and ‘bears’ cannot both be right in their predictions, while in product-markets the creative exercise of marketing and R&D personnel’s imaginations may continuously send out waves and backwashes in keeping with Schumpeterian notions of creative destruction. If one accepts Shackle’s alternative starting point, one must sacrifice notions pertaining to ‘given’ preferences and technologies and, with them, the stable functions upon which IS-LM macro models2 and orthodox value theory are built.