Hicks as a critic of neowalrasian equilibrium

ARIEL DVOSKIN; PAOLO TRABUCCHI

Conferencia; XX ESHET Conference; 2016

European Society of the history of economic Thought

The present article attempts to give an answer to whom, having been educated within the neoclassical approach in the last 30 years, aims to take a position on it. The issue is rather complex since the neo-Walrasian method on which the theory has been presented and developed has become a sort of «second nature» for many economists: to the extent that it seems currently impossible to establish, whether those aspects of the theory that have never cesased to cause disconfort among scholars, are only an inevitable cost that must be paid to have a rigourous explanation of prices and distribution (as the defenders of the theory claim); or, to the contrary, constitue elements that should force the abandonment of the theory (as sustained by several critics). Instead of approaching the issue by examining the ?thousands? of ramifications in which the neo-Walrasian method is currrently presented, we address the problem by analysing Hicks? writings. The reason is that this author has been both, its most influential promoter with his Value and Capital (1939), but also one of its most sharp, but generally overlloked, critics in his subsequent writings (1946, 1956, 1965, 1976). The argument is developed in three steps. It is a distintive aspect of the lack of clarity that sourrounds the neo-Walrasian method that it is not an easy task to determine its aims and scopes: namely the relation between the object determined by theory and observations. It is an aspect that is rarely discussed, but that must be nonetheless addressed if the aim is to provide an impartial judegement of the question. In the first part, we find new reasons in Hicks? writings that allow us to affirm that, not least that withitn the traditional method of analysis, within the neo-Walrasian method two notions of price must be distinguished too: a theoretical price and a observable price that, not capable of being theoretically determined, must nonetheless gravitate around the former. In the second part we reconstruct two arguments that have made Hicks seriouly doubt that the scopes of the theory can be reached by means of the new method. The first conscerns what may be labeled as the ?speed of adjustment?; while the second involves what we may generally include under the issue of the ?indeterminateness? that sourrounds price expectations. While both problems have been already discussed in general terms, here we extend the argument and present several aspects of the discussion that have not been explored so far. Finally, we show why what has been addressed in the first two parts is also relevant for neo-Walrasian theory as its stands at present.