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Neoclassical economics is the phase of economic science from the 1870s to the 1930s and later. It resulted from the ”marginalist revolution” in economics during the 1870s to the 1890s, above all, the marginal utility theory of value in reaction to classical political economy’s labor-based version. Marginalism’s founders were William Jevons, Carl Menger, and Leon Walras, simultaneously in 1871-4 ”discovering” marginal utility theory to substitute for the labor version. ”Neoclassical economics” was coined in the 1900s by Thorstein Veblen suggesting that marginalism was, with its utilitarianism and hedonism, continuous with and ”scarcely distinguishable” from classical political economy. Subsequent neoclassical figures were Philip Wicksteed, Eugen Bohm-Bawerk, Friedrich Wieser, Knut Wicksell, Francis Edgeworth, Vilfredo Pareto, Alfred Marshall, Irving Fisher, John B. Clark, etc. Like classical political economy, neoclassical economics involved two branches: pure economic theory and social economics or economic sociology, while being narrower in scope and more mathematical in method.
Jevons coined the term ”economic sociology” suggesting its inclusion into economics. He even suggested that ”it is only by subdivision, by recognizing a branch of Economic Sociology [etc.], that we can rescue our [economic] science from its confused state.” His economic sociology is defined as the ”Science of the Evolution of Social Relations” in connection with the economy. Wicksteed advised that economics ”must be the handmaid” of sociology. Edgeworth projected mathematical sociology of which marginal utility theory was the ”most sublime branch” and considered economics the branch ”most applicable” to sociology.
Walras adopted the idea of ”social economy” redefined as the ”theory of the distribution of social wealth” and integrated with ”pure” political economy as the ”theory of price determination under the hypothetical regime of absolutely free competition”. Wicksell also embraced ”social economy” as defined in conjunction with pure and applied economics. Clark considered ”Social Economic Dynamics economics” to be ”third division” integrated with its other ”natural divisions” based on ”sociological evolution”. Pareto suggested that economists ”have to consider not just the economic phenomenon taken by itself, but also the whole social situation, of which the economic situation is only a phase.” Wieser advocated social economics studying the ”social relations of the economy”, or economic sociology addressing the ”sociological problems of economic theory”.
For much of neoclassical economics, the economy is implicated in society, thus a social phenomenon. Walras recognized that market and other economic transactions by necessity occurred within society. Pareto observed that the ”states” of the economy formed ”particular cases of the general states of the sociological system” which were ”much more complicated,” inferring that economics was an ”integral” part of sociology in which ”complications are greater still and by far.” Menger described economic processes as instances of ”concrete social phenomena” and the national economy as a social economy, the ”social form” of economic activity. Wieser remarked that every economic agent interpreted the marginal principle of the highest total utility at the lowest cost ”in the light of his social environment.” For Wicksteed the economy is a social phenomenon because it ”compels the individual to relate himself to others”, making economic laws the ”laws of human conduct”, thus psycho-social rather than physical phenomena. According to Clark, through arranging producers and consumers into differentiated and unequal social groups the ”socialization” of the economy results in societal differentiation, while a special case of ”sociological evolution” is economic change.
For these neoclassical economists the influence of society on economic life is evident and strong. In Clark’s view, many economic phenomena depend on ”social organization.” Walras conceded that without ”interference” from political authority even a ”laissez faire” economy could not function adequately. According to Wicksteed, the market ”never has been left to itself” because of social interference, and it ”never must be.” Also, Marshall identified the adverse impact of customs on the ”methods of production and the character of producers.”
- Jevons, W. S. (1965)  The Theory of Political Economy. Kelley, New York.
- Pareto, V. (1963)  The Mind and Society. Dover Publications, New York.
- Schumpeter, J. (1954) History of Economic Analysis. New York: Oxford University Press.
- Walras, L. (1936)  Etudes d’economie sociale. Pichon et Durand Auzias, Paris.
- Wicksteed, P. (1933)  The Common Sense of Political Economy. Routledge and Kegan Paul, London.