Dynamc Foundatns of Economc Anlysis

Attempts to cope with time irreversibility in economic analysis were prevalent towards the end of the 19th century in the writings of Alfred Marshall, Carl Menger and Thorstein Veblen. Each inspired a distinctive school of economic thought: neo-classicism, Austrianism and institutionalism respectively. In this book, the struggle between abstraction, promoted by Austrians and historicism, defended by institutionalists is seen as centering upon time irreversibility and its repercussions....
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Attempts to cope with time irreversibility in economic analysis were prevalent towards the end of the 19th century in the writings of Alfred Marshall, Carl Menger and Thorstein Veblen. Each inspired a distinctive school of economic thought: neo-classicism, Austrianism and institutionalism respectively. In this book, the struggle between abstraction, promoted by Austrians and historicism, defended by institutionalists is seen as centering upon time irreversibility and its repercussions. The gradual abandonment of Marshallian pragmatism in neo-classical economics, with regard to time irreversibility is analysed. The book then assesses recent attempts to reinstate time irreversibility into mainstream economic analysis. The introduction of hysteresis, institutional rigidities and path-dependencies are discussed. It is argued that ad hoc adjustment of essentially timeless neoclassical models to account for aspects of time irreversibility is unsatisfactory. It is shown that the natural sciences, from which neoclassical economics drew inspiration in the past, have moved on and new irreversible time foundations are now on offer. Particular attention is paid to the 'self organisation' approach of Ilya Prigogine.