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More than one hundred years ago, Thorstein Veblen wrote a powerful critique of neoclassical economics that castigated the discipline for turning the individual into a “lightning calculator of pleasures and pains, who oscillates like a homogeneous globule”, or equivalently, for the individual’s static maximization of utility based on exogenous preferences. His critique is relevant even today, since there are economists who still continue to criticize the assumptions of homo economicus and exogenous preferences, and insist on introducing more realism to economic theory. Furthermore, recent developments in game theory and experimental economics, which stand at the cutting-edge of economics today, are far more accommodating to the ideas of institutions that were central to Veblen’s theory than neoclassical economics.

The goal of this paper is to examine the strengths of the Veblenian critique of neoclassical economics. In particular, it investigates whether or not Veblen’s rejection of the axiomatic approaches to economics is merely an attack on neoclassical economics which fails to provide an alternative positive theory. Starting with their conception of the individual, going through their theoretical frameworks, and ending with an investigation of how they approach a concrete issue, this paper offers a comparative exposition of the Veblenian and neoclassical approaches to economic theory. [excerpt]