C H A P T E R T W E N T Y - F O U R Postwar Neoclassical Microeconomics Postwar neoclassical microeconomic theory was a curious mixture of successes and problems. Its successes include widespread use, as both a basis for all areas of economics and a growing method in other social sciences. | CHAPTER TWENTY-FOUR Postwar Neoclassical Microeconomics S. Abu Turab Rizvi Introduction Postwar neoclassical microeconomic theory was a curious mixture of successes and problems. Its successes include widespread use as both a basis for all areas of economics and a growing method in other social sciences. The ideas that constrained optimization is the embodiment of individual rationality and that individually rational behavior should be the building block of all social theory have proved very popular. This popularity is belied however by very serious churning in the underlying formal theory of neoclassical microeconomics in the postwar period. Indeed the formal theory can be characterized as having a series of impossibility results that imply a demonstrable lack of progress on the main problems set for the theory. The theory had to be reinvented regularly in response to problems and applications of the theory are often tenuous inasmuch as the theory is not firm. While this protean character has allowed the theory to survive and become widespread many of the main interests of microeconomists have been sidestepped. The overall result is breadth of application and use combined with troubling lack of depth. The resulting dynamic is best seen historically. The topic is vast. In order to keep this presentation manageable this chapter focuses on the main aspects of general equilibrium theory and the pluralist approaches that have come increasingly to replace it. Samuelson s Foundations and its Setting Postwar neoclassical microeconomics began confidently with Paul Samuelson s Foundations of Economic Analysis 1947 . The book arose from Samuelson s Harvard 378 S. A. T. Rizvi . dissertation. As Samuelson s career advanced the book s main mathematical device - the formulation of nearly every economic matter as a constrained optimization problem - became commonplace. Constrained optimization came to represent the economic problem subsuming Lionel Robbins s .
