The Institute Blog

READING ROOM: The Dance of the Meta-Axioms

"Neoclassicism owes its hegemonic position in the social sciences to this most peculiar, axiomatically inbuilt, theoretical failure." So says Yanis Varoufakis, Professor of Economic Theory at the University of Athens, Greece. In this working paper, he defines three meta-axioms that characterize neoclassical economic theory. Confronted with a theoretical challenge, the meta-axioms begin to dance. Quickstep, move, and shuffle -- that is how neoclassicism defends its hegemony, according to Varoufakis.

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Varoufakis asserts that Neoclassicism will not accept argument about whether or not its defining axioms can be shown to produce a dynamic by which Pareto optimality is organized out of chaotic economic states and shown to be stable. SFEcon Model 0 (www.sfecon.com) operates on the three meta-axioms by which Varoufakis (correctly, in our view) characterizes Neoclassicism. It demonstrates, objectively and in exhaustive quantitative detail, the emergence of Pareto optimality out of chaotic economic states, and shows the general optimum to be stable. And it does so by application of the standard techniques of non-linear dynamic systems analysis that economic science might do well to adapt.

Varoufakis has acknowledged the existence of our Model 0 via an email in which he allows that it is a counterexample to his thesis and worthy of refutation. The refutation, however, arrives in the form of not arriving. Challenged in one forum by evidence that he apparently cannot refute, Varoufakis (in his phrase) dances off to another forum where that evidence has yet to be admitted.

While the premise of New Economic Thinking might quickly pass by the old Neoclassical orthodoxy, I respectfully suggest that an objectively-operating, dynamic, and general solution to Neoclassicism’s economic calculation problem is the height of newness. I would also offer my judgment that a great deal of fertile territory lies unexplored beyond the barrier of economic calculation.

If INET is going to allow space for Varoufakis’ defense of this barrier – and allow him to proceed by alleging cowardice and academic dishonesty on the part of his opposition – I hope this forum will also demand his reasoning as to why the evidence against his thesis is not evidence.

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