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

Author

Listed:
  • John Peters

    (University of Southern California
    School for International Traning)

  • John Elliott

    (University of Southern California)

  • Stephen Cullenberg

    (Economics Department, University of California, Riverside)

Abstract

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
    as

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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume28/V28N2P217_240.pdf
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    References listed on IDEAS

    as
    1. Blaug,Mark, 1997. "Economic Theory in Retrospect," Cambridge Books, Cambridge University Press, number 9780521577014.
    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, September.
    4. Geoffrey M. Hodgson, 1999. "Evolution and Institutions," Books, Edward Elgar Publishing, number 1481.
    5. Herman W. Hoen, 1998. "The Transformation of Economic Systems in Central Europe," Books, Edward Elgar Publishing, number 848.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Arrow Debreu; Equilibrium; General Equilibrium; Neo Classical; Neoclassical;
    All these keywords.

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • P21 - Political Economy and Comparative Economic Systems - - Socialist 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 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights

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