Equilibrium for What?: Reflections on Social Order in Economics

At the center of almost all economic theory is the concept of equilibrium. For economic theory, equilibrium is synonymous with order. Certainly the existence of regularities is a prerequisite for developing theoretical explanations. Yet the equilibrium method, although correctly searching for order in society, led economists toward the wrong source of this order. It is the argument of this article that the net effect of what philosopher Frank Hahn called the "central organizing concept of economics," equilibrium, is to locate the cause of social order in nature and in natural forces instead of in society and human institutions. Order in society, or at least in the economy, is provided by natural forces and leads to a natural order, an equilibrium, and this outcome is also the most socially beneficial. Mathematics has provided the tools necessary to arrive at a determinate equilibrium solution. Yet to ensure a tendency towards equilibrium one must assume perfect competition, perfect expectations and the absence of money; that is, one must assume away the market, exchange, production, and even capitalism itself.