Hicks as a critic of neowalrasian equilibrium

ARIEL DVOSKIN; PAOLO TRABUCCHI

Amberes

Congreso; 21 anual ESHET conference in Antwerp; 2017

European Society of the history of economic Thought

The paper tries to clarify certain problematical aspects that characterize the method at the basis of theneo-Walrasian version of the neoclassical theory by going back to the writings of Hicks, who has bothbeen one of the most influential proponents of the neo-Walrasian approach (Hicks, 1939), and one of itsfirst critics (Hicks, 1946, 1956, 1965, 1976, 1977).In the first part of the paper (a first draft of which was presented at the 2016 Eshet Conference) weascertain the intended relation between the objects determined by the neo-Walrasian theory on the onehand, and observations of economic reality on the other. We find that what Hicks?s writings seem toimply is that, just as in the traditional method of analysis, two notions of price ought to be distinguishedwithin the neo-Walrasian method: an observable price, that the theory cannot generally determine, anda theoretical price, which it is the aim of the theory to show is the centre of gravitation of the former.In the second part of the paper we reconstruct the main reasons why Hicks came to doubt that such anaim can actually be reached by the neo-Walrasian theory. First, we find new arguments to claim that thecritique that Hicks so often presented in terms of the ?slowness? of the process of ?price adjustment?(Hicks, 1946, 1965, 1976) should in fact be interpreted as the sign of the awareness on Hicks?s part ofthe lack of persistence that characterizes the givens of the neo-Walrasian theory ? such a lack ofpersistence being in its turn the effect of the treatment of capital on which the neo-Walrasian theory isbuilt. Contrary to the reconstruction of this aspect of Hicks?s thought recently advanced in De Vroey(2006), we thus confirm the reconstruction already presented in Petri (1991). We next explore thepossibility that a second critique by Hicks, that emerges at a certain point in his discussion of the wayprice-expectations are treated in neo-Walrasian theory, can be shown as going deeper than his firstcritique. For while according to the first critique the neo-Walrasian concept of equilibrium, thoughscarcely useful, is nonetheless theoretically conceivable, according to this second critique, which savefor the exception of Leijonhufvud (1985) has gone practically unnoticed, that notion of equilibriumwould simply be ?nonsense? (Hicks, 1977)