Like most graduate students in economics during the last 40 years, I spent many painful hours plowing through Paul Samuelson’s Foundations of Economic Analysis (Harvard University Press, 1947). From that sacred text we novices learned how to prove many specific theorems. Far more important, we learned how neoclassical economics—“modern economic science”—was supposed to be done.

We built mathematically specified “models,” sets of equations describing the relations of selected economic variables. Model in hand, we proved that it had a stable equilibrium, then characterized the relations of the variables in that blessed state. Altering the “data” or the “parameters” of the model, we ascertained how a new equilibrium differed from an initial one. In its advanced form this protocol rendered most older economists instantly obsolete, but for young math wizards like Samuelson it opened up the prospect of “new realms of aesthetic delight.” Eventually most economists entered those realms. Playing increasingly clever mathematical tricks with the models constituted “scientific progress.”

Samuelson fashioned his models, which set the standard, after 19^th century physics. Functions were assumed to be smooth and continuous. Economics was reduced to various types of the same calculus problem: finding a constrained extremum. The economist’s job was to state the objective function and the constraints, then grind out the solutions. This required considerable mathematical ability and stomach for tedium but little imagination and no familiarity with economic reality.

By the 1960s, if not earlier, academic economists who quarreled with this way of doing the job were, as Roy Weintraub put it, “regarded by mainstream neoclassical economists as defenders of lost causes or as kooks, misguided critics, and anti-scientific oddballs.” By aping 19th-century physicists, neoclassical economists convinced themselves and others that they were doing science, but the effort was basically misguided, not so much scientific as, in F.A. Hayek’s term, “scientistic.” Human beings, purposeful and creative, are not like atoms; nor is a market analogous to a physical or chemical system. In the view of Hayek and his teacher Ludwig von Mises, neoclassical economics is, in critical respects, pseudo-science.

James Buchanan’s What Should Economists Do? (Liberty Press, 1979) presents a telling critique of mainstream economics. “Its flaw lies in its conversion of individual choice behavior from a social-institutional context to a physical-computational one,” he writes. Further, the obsession with equilibrium gives rise to “the most sophisticated fallacy in economic theory, the notion that because certain relationships hold in equilibrium the forced interferences designed to implement these relationships will, in fact, be desirable.” Mainstream economists cannot move the earth with a mathematical lever, because they have no place to stand—no “given” information about property rights, consumer preferences, resource availabilities, and technical possibilities. What neoclassical economics takes as given is, in reality, revealed only by competitive processes. “Most modern economists,” Buchanan aptly concludes, “are simply doing what other economists are doing while living off a form of dole that will simply not stand critical scrutiny.”