Page 66 - Global Political Economy_Understanding The International Economic Order

NEO CLASS ICAL C ONCEP T OF AN ECONO MY
eventually attainedthrough such a process of incremental change.
The one possible exception to the principle of marginal utility, at least
for most individuals, is the desire for wealth itself, a desire that ap-
pears insatiable.
The model of competitive equilibrium is intellectually and morally
attractive. A free-market competitive equilibrium becomes efficient
when demandequals supply in every market andall the resources of
an economy are fully utilized. Such an equilibrium has been reached
when no individual or firm can achieve greater welfare by altering the
allocation of resources in any way whatsoever without decreasing at
least one other person’s welfare; this is the concept of the Pareto opti-
mum discussed below in this chapter. In other words, the distribution
of income andwealth that emerges in such an equilibrium cannot be
alteredby economic policies without hurting at least one other per-
son. In effect, economic policy necessarily must either have no effect
or must hurt some group of citizens. Therefore, most economists be-
lieve that the role of government shouldbe minimal.
An important andfar-reaching implication of these fundamental
ideas is that economics and its emphasis on individual choice is appli-
cable to all aspects of human behavior. As a universal science of
choice, economics has no clear andseparate domain of its own but
can be usedto analyze and understandalmost every facet of human
behavior. Moreover, the theories of economic science (like those of
physics andchemistry) are consideredobjective, universal, and appli-
cable across all societies and historical periods. The fundamental
principles of economic science andits methodology are not limited
by boundaries of any kind.
This proposition, that economics is the “one anduniversal” social
science, has been defended by Lionel Robbins in the following words:
It has sometimes been assertedthat the generalizations of Economics [the
upper-case letter is his] are essentially historico-relative in character, that
their validity is limited to certain historical conditions, and that outside these
they have no relevance.... This view is a dangerous misapprehension....
No one will really question the universal applications of such assumptions as
the existence of scales of relative valuation, or of different factors of produc-
tion, or of different degrees of certainty regarding the future....It is only
failure to realize this, anda too exclusive preoccupation with the subsidiary
assumptions, which can lendany countenance to the view that the laws of
Economics are limitedto certain conditions of time andspace. 12
12
Lionel Robbins, quotedin Lloyd G. Reynolds, The Three Worlds of Economics
(New Haven: Yale University Press, 1971), 19–20.

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