Realism and determinism: some thoughts on neoclassical economics

Abstract

Neoclassical economics is often criticised for being deterministic and disconnected from social reality. A related criticism is that neoclassical economic theory is instrumentalist. This article argues that neoclassical economics, if properly understood, can be given a realist interpretation. The origins of classical and neoclassical economics are briefly discussed and the scholarly shift away from political economy is located in the marginal utility revolution in economic thought in the 1870s. It is argued that the core assumptions of neoclassical economics capture essential aspects of social reality and are not merely convenient, fictitious abstractions; that the charge of instrumentalism is not entirely justified, and that neoclassical economic theory does not imply that social processes are deterministic or mechanistic in reality.