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Economic Transition As a Crisis of Vision: Classical versus Neoclassical Theories of General Equilibrium


  • John Peters

    (University of Southern California
    School for International Traning)

  • John Elliott

    (University of Southern California)

  • Stephen Cullenberg

    () (Economics Department, University of California, Riverside)


In this paper we compare the classical general equilibrium framework of Smith and Marx with the neoclassical one of Arrow and Debreu, and find that these competing paradigms of equilibrium clash on a number of critical issues--efficiency, power, the role of markets, time, the nature of exchanges, and the importance of institutions. We argue that it is primarily a neoclassical, Arrow-Debreu vision of the economy that underlies current shock therapy policy recommendations, and that such policy advice has often had devastating effects on the transitional economies. As an alternative, we re-examine transition and economic reform through the theories of the classical economists to suggest policy recommendations.

Suggested Citation

  • John Peters & John Elliott & Stephen Cullenberg, 2002. "Economic Transition As a Crisis of Vision: Classical versus Neoclassical Theories of General Equilibrium," Eastern Economic Journal, Eastern Economic Association, vol. 28(2), pages 217-240, Spring.
  • Handle: RePEc:eej:eeconj:v:28:y:2002:i:2:p:217-240

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    References listed on IDEAS

    1. Blaug,Mark, 1997. "Economic Theory in Retrospect," Cambridge Books, Cambridge University Press, number 9780521577014, May.
    2. Bloom, David E. & Malaney, Pia N., 1998. "Macroeconomic consequences of the Russian mortality crisis," World Development, Elsevier, vol. 26(11), pages 2073-2085, November.
    3. Rosenberg, Alexander, 1992. "Economics--Mathematical Politics or Science of Diminishing Returns?," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226727233.
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    More about this item


    Arrow Debreu; Equilibrium; General Equilibrium; Neo Classical; Neoclassical;

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • P21 - Economic Systems - - Socialist Systems and Transition Economies - - - Planning, Coordination, and Reform
    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • B13 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian)
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy


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