The Fire Machine: Economics as a Social Physics of Natural Law

Neoliberalism as an economic doctrine is an amalgam of different traditions dating to the marginalist ‘revolution’ of the 1870s. Menger with his subjective value theory, Jevons with his utilitarian theory of price, and Walras with his general equilibrium theory of ‘the market’ mounted a counter-revolution against the labour theory of value of classical political economy, establishing ‘economics’ as the ‘social physics’ of thermoindustrial capitalism. Within the history of economic thought the differences between the Austrian and neoclassical schools are emphasized, but what is common to both is a subjective, anti-empirical reduction of oikonomia to the psychology of ‘the price mechanism’, and the paradoxical assertion that prices are determined by immutable ‘economic laws’ on par with those identified by physicists. This watershed occurred in an intellectual milieu characterised by the rise of the labour movement and the energy revolution in physics, as the analysis of the work of the combustion engines driving the industrial revolution led to the signature achievement of nineteenth-century physics, the identification of the 1st and 2nd laws of thermodynamics. The chapter discusses the origin and standing of economics in terms of its expulsion of the biophysical realities of ecology and energy from the realm of economic thought.