Question

In Thorstein Veblen’s famous essay, Why is Economics not an
Evolutionary Science, he makes his famous critique of the
“hedonistic” assumptions of “classical economics”.
The hedonistic conception of man is that of a lightning calculator of
pleasures and pains, who oscillates like a homogeneous globule of
desire of happiness under the impulse of stimuli that shift him about
the area, but leave him intact. He has neither antecedent nor
consequent. He is an isolated, definitive human datum, in stable
equilibrium except for the buffets of the impinging forces that
displace him in one direction or another. Self-imposed in elemental
space, he spins symmetrically about his own spiritual axis until the
parallelogram of forces bears down upon him, whereupon he
follows the line of the resultant. When the force of the impact is
spent, he comes to rest, a self-contained globule of desire as before.
(Veblen 1898: 389-390)
Unfortunately, not much has changed since Veblen wrote this paper.
The most prominent assumption in neoclassical models, the “rational
economic agent”, is no different from the hedonistic “lightening
calculator” that Veblen criticized over a century ago. While these
assumptions may be useful for isolating variables and analyzing
mechanisms, they limit the real world application of Neoclassical
models. This narrow methodological approach leaves little room for
institutional arrangements, things like culture, social norms, and
other important factors that can shape behavior. Old Institutional
Economics tries to mitigate this gap in Neoclassical Economic theory.

1. Summarize, in your own words, the criticism Veblen makes about neoclassical economics. What aspect(s) of the neoclassical framework is he criticizing?

2. What, in the author’s opinion, do the neoclassical models leave little room for, and why might this be problematic?

Answer 1

veblen in his explanation criticised the classical assumption of rationalitywhich he compared as the lightening calculator of plesure and pain. according to him man is just a homogeneous globule of desire of happiness which ossilates under the impulse of stimuli . the outer forces makes the man move from one point to another like a  buffets of the impinging forces that
displace him in one direction or another. so nothing is controlled by the man and the person acts like a puppet to the economic forces. here in this writting veblen is basically criticising the assumption made by the neoclassicals that man is a rational economic agent and takes decission rationally whcich is not a common case in the real world.

in authors openion the assumption of rationality and the narrow methodological approach leaves little rooms for institutional arrangements, like culture, social norms and other important factors.