Late Neoclassical Economics as Neoliberal Neurosis

Abstract

This commentary reflects on the potential of Madra's Late Neoclassical Economics for comprehending neoliberalism. Extending Madra's work, it presents an ideology critique of late neoclassical economics (LNE) as articulating a social fantasy of harmonious market order that enables neoliberal proponents to structure their reality against the Real of Capital. Madra's exposition of LNE's orientation around the theoretical problematic of neoclassical humanism enables consideration of neoliberalism as informed by an obsessional neurotic logic, whereby subjects postpone encountering the Real via repeated ideological modifications to preserve their fantasy against traumatic incursions. Exploring the conditions of possibility for functioning markets, LNE reinforces the fantasy of market order through theoretical innovations rationalizing increasingly intensive measures to realize it. Thus, symptoms bleeding through gaps between the Symbolic reality of neolibealism and the Real of Capital are disavowed as market and cognitive failures, foreclosing critical engagement with capitalist dynamics. This is illustrated through examining the new institutional economics of development as disavowing the violence of capitalism.

Key Words:

• Neoclassical Economics
• Neoliberalism
• New Institutional Economics
• Theoretical Humanism
• Slavoj Žižek

Acknowledgments

The author acknowledges the financial support provided by the University of Sydney through the Research Training Program Stipend Scholarship and the Merit Award Scholarship. Sincere thanks, too, to Chizu Sato for her encouragement in completing this article, and to Frank Stilwell for his feedback on an earlier draft.

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

1 Of course, the neoliberal project and its evolution has been considered by Madra elsewhere: e.g., Özselçuk and Madra (2010), Madra and Adaman (2014, 2018), and Madra and Özselçuk (2019).

2 Richard Peet (2019, 93) has recently extended this logic to chastise neoliberalism as little more than “a synthesis of mal-practice and lies: ideological disguise, for an economic system that must fear the awful truth.”

3 Of course, such fantasies cannot ever be realized, lest they engender trauma in subjects by exposing the void that prevents the totalization of society. This necessitates that fantasies perpetually reproduce and reinvoke their own becoming through affective technologies to explain the current lack of social harmony and to prevent elimination of the posited obstacle to this condition (Glynos and Stavrakakis 2008; Mandelbaum 2020).

4 Importantly, as Wilson (2016) notes, this understanding of neoliberalism as a form of obsessional neurosis should not be interpreted as a totalizing account that characterizes all neoliberals as neurotics. Wilson thus contrasts neurotic neoliberals, such as Jeffrey Sachs and Paul Krugman, from “psychotic” neoliberals, such as William Easterly and Niall Ferguson, who remain unaware of the gap between their fantasy and the Real. Yet it is precisely the pragmatism of the former, in their use of increasingly pervasive and broad-ranging policy mechanisms to preserve the foundations of their fantasy, that has buttressed the neoliberal project against its myriad failures, enabling it to evolve at the margins to reflect its changing context.

5 This is consistent with recent reflections by John Davis (2017) and D. Wade Hands (2019) on the emergent methodological trend in mainstream economics, a trend in which rational choice theory is increasingly conceptualized as a normative rather than positive account of economic behavior.

6 As Madra (2017, chap. 6) observes, however, this emphasis on market-enhancing interventions certainly does not mean that LNE constitutes a strictly “pro-government” economic discourse. Indeed, significant heterogeneity remains within the political topography of LNE, which complements discussion of “market failures” with extensive theorization of “government failures.” For consideration of this point in relation to neoliberalism, see Madra and Adaman (2014, 2018).

7 “In the beginning there were markets” (Williamson 1975, 21).

8 For instance, echoing Ronald Coase’s (1937) argument that the frictionless model of neoclassicism does not correspond to a reality characterized by transaction costs, Douglas North (2000, 7) posits that “there is no such thing as laissez-faire … any society, economy, or polity is structured and the structure is a person-made function of the way in which we order the society. The structure is a complex mixture of rules, norms, conventions and behavioral beliefs, all of which together form the way in which we operate and determine how successful we are in achieving our goals.”

9 Most prominently, by loosening ADGE assumptions pertaining to perfect competition via the smooth formulation and enforcement of contracts, Coase (1937, 1960) introduces “transaction costs” to explain why it may be more efficient to supersede markets with other economic institutions.

10 Indeed, everything from the existence of institutions to structural change is driven by this subject—i.e., that “the agent of change is the individual entrepreneur responding to the incentives embodied in the institutional framework”—and by individual economic rationality itself: “Institutions change, and fundamental changes in relative prices are the most important source of that change” (North 1990, 83–4; cf. Milonakis and Fine 2007).