The Veblenian critique of mainstream economics has something important in common with the critical realist critique. It is essentially an ontological critique. By this I mean that it inquires into the mainstream tradition's preconceptions about the nature of economic reality. Further, both theories of mainstream economics claim that such preconceptions revolve around a pseudo-reality which conflicts with some widely accepted feature of science. For Thorstein Veblen that feature of science is Darwinian evolution. For critical realism, it appears to be the activity of experimental science.
The paper examines the similarities and dissimilarities of these two critical theories. It is organized as follows. The first section discusses the Veblenian critique. The second section reviews the critical realist critique. The third section explores the similarities and differences between the two. The final section offers concluding remarks.
The Veblenian Critique
Veblen set forth his famous critique of mainstream economics in a series of essays written at the turn of the twentieth century (1919, 56-179). He argued that mainstream theory purveys a vestigial animistic bent, which is organized around the concept of a beneficent natural order. While mainstream economics sometimes deals with facts, its primary emphasis is on rendering its account of the facts in terms that are consonant with this overweening concept of a beneficent natural order.
By virtue of their hedonistic preconceptions, their habituation to ways of a pecuniary culture, and their unavowed animistic faith that nature is in the right, the classical economists knew that the consummation to which, in the nature of things, all things tend, is the frictionless and beneficent competitive system. (145) In this vein, the Veblenian critique argues that mainstream economics is "teleological," in the sense that the workings of the market system are pictured as conducing toward a beneficial purpose, over and above the purposes of persons working toward particular ends. The competitive outcome then is the "normal case," or final term, which sets the direction of the natural "tendency" of things.
[The normal case] having once been accepted and assimilated as real, though perhaps not as actual, it becomes an effective constituent in the inquirer's habits of thought, and goes to shape the facts. It comes to serve as a norm of substantiality or legitimacy; and facts in some degree fall under its constraint, as is exemplified in many allegations regarding the "tendency" of things. (Veblen 1919, 143) In this regard, mainstream theory does not sustain the Darwinian concept of a cumulative causal sequence, what is sometimes called cumulative causation. Rather it conceives the activity of economic science as the problem of uncovering the underlying beneficent natural economic structure, which exercises a "constraining surveillance" over the actual run of events (Veblen 1919, 69). In effect, this real structure is invariant to the run of actual events. It stands as an article of faith among mainstream economists that the actual state of affairs somehow converges upon the underlying beneficent order. This normal state is then regarded as ultimately more real than the flux of actual events. For example, regarding Adam Smith, Veblen wrote,
Both "natural" and "real" are placed in contrast with the actual; and, in Smith's apprehension, both have a substantiality different from and superior to facts. (117) This vestigial organizing principle survived the transition to modernity largely because the increasingly technical apparatus of economic theory...