Introduction: Stagflation Overturns the Keynesian Paradigm
The history of economic thought is a pendulum swing between the ambition to grasp the whole and a return to elementary mechanisms. The stagflation of the 1970s unmasked the illusion of macroeconomic controllability, revealing that the economy is not a mechanical system of equations. It is a historical system of contracts and institutions where prices and wages serve as vehicles for conflicts over the distribution of goods. Modern microeconomics rejects the fiction of timeless equilibrium, focusing instead on institutional frictions and the bounded rationality of human agents.
Williamson and Vickers: Transaction Costs and Uncertainty
Oliver Williamson defined the firm as a governance structure rather than merely a production function. He introduced the concept of transaction costs—the expenses associated with information searching, negotiation, and contract enforcement. His triad: bounded rationality (contractual incompleteness), opportunism (strategic self-interest), and asset specificity (vulnerability to contractual hold-up) forms the foundation of modern organizational theory. The firm emerges wherever the market mechanism proves more costly than internal hierarchy.
Douglas Vickers complemented this picture with a critique of finance. He demonstrated that neoclassical models erroneously assume an unlimited supply of capital. In reality, money is a scarce condition for access to production, and decisions are sequential and embedded in historical time. Meanwhile, Ivor Pearce pointed to barriers in preference aggregation: revealed preference theory examines the consistency of choices but remains silent on their social context and stability.
Equilibrium, the Core, and the Sraffa Revolution
E. Roy Weintraub proved that the mathematical proof of the existence of general equilibrium is not a proof of its historical stability. The system may never reach the intersection of the curves. Game theory introduced the concept of the core—the set of stable allocations. If the core is empty, the market will not create a self-sustaining order, making law and regulation a necessary condition for cooperation rather than an external interference.
Piero Sraffa initiated a seismic shift by demonstrating that prices of production result from technology and the social division of surplus (wages vs. profits), rather than subjective utility. The phenomenon of reswitching (the return to previously discarded techniques) overturned neoclassical dogma: capital is not a homogeneous technical quantity but a category dependent on income distribution. The choice of technology is, therefore, always a political and distributional choice.
Weintraub and Shackle: The Anatomy of Disequilibrium
Sidney Weintraub rejected "hydraulic" Keynesianism (the IS-LM model), accusing it of ignoring nominal wages. Inflation is often the result of cost-push pressures and income conflicts, not just excess demand. The asymmetry of wages and prices means the economy does not respond symmetrically to stimuli. Ronald Bodkin and Paul Wells empirically confirmed that disequilibrium is the normal state, and consumption depends on social norms and the "ratchet effect."
G.L.S. Shackle ultimately defined a decision as a creative act under conditions of fundamental uncertainty. The future is not a probability distribution but a horizon that is only just emerging. In such a world, optimization loses its meaning in favor of procedural rationality—the ability to maintain consistent practices in an unknowable environment.
Summary: Managing Disequilibrium
Modern business must manage disequilibrium instead of striving for theoretical optimization. The state serves as an institution that stabilizes expectations, building a framework for contractual credibility. By abandoning the illusion of harmony, modern economics becomes a science of structural tensions. Its task is not to promise order, but to unmask false promises and provide a compass in a world of permanent uncertainty. This is not a crisis of the discipline, but its return to intellectual maturity.
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