The Irrationality of Marginalist Economics

Abstract

The foundation of the marginalist abstraction of the ‘economy’ from ‘society’, of the ideal rationality of capitalism from its contingent social forms, is its demonstration of the ‘formal rationality’ of the fundamental institutions of capitalist production, distribution and exchange. The rationality of these institutions is formal in the sense that they have a purely instrumental significance in relation to human action, providing only a technical means through which individuals can most efficiently achieve their ends, and so impose no substantive constraints on the ends pursued. It is only on this basis that social values can ultimately be reduced to the subjective evaluations of individuals. On the other hand, if the fundamental institutions of the capitalist economy could be shown to have a necessary substantive significance in subjecting individuals to social constraint, the marginalist abstraction of form from content, formal from substantive rationality, economy from society, would be deprived of any coherent foundation, and its ideal model would cease to have any explanatory validity.