Market Economy: An Oikonomic Equilibrium or a Chrematistic Excess Supply System?

Abstract

According to the dominant paradigm, the essential systemic feature of a market economy is the aggregate product market equilibrium. Kornai, on the other hand, sees the essential characteristic of the market economy as being a surplus economy, i.e. there is no aggregate product market equilibrium in the market economy. In this paper, I examine the logical structure that gives rise to these two irreconcilable systemic features. I point out that in the dominant theory of real analysis - oikonomia – the possibility of equilibrium follows a logical chain. In contrast, in the heterodox logical structure combining Keynes and Marx, the logical chain is monetary analysis - chrematistics – aggregate product market excess supply. Homo oiconomicus versus homo khrematisticus. Macro-oiconomics versus macro-khrematistics. The two are irreconcilable. If we accept Max Weber's and Marx's claim that the essential characteristic of the market economy is khrematistics, this has serious consequences for macroeconomic modelling and theory building: macro-oikonomics does not advance the theoretical understanding of the market economy.