Kaldor on Debreu: The Critique of General Equilibrium Reconsidered

Abstract

This paper revisits Kaldor's methodological critique of orthodox economics. The main target of his critique was the theory of general equilibrium as expounded in the work of Debreu and others. Kaldor deemed this theory to be seriously flawed as an empirically adequate description of real-world economies. According to Kaldor, scientific progress was not possible in economics without a major act of demolition, by which he meant the destruction of the basic conceptual framework of the theory of general equilibrium. We extend Kaldor's critique by recourse to major developments in 20th century philosophy of mathematics, and then go on to demonstrate that Debreu's work, based as it is on Bourbakist formalism and in particular Cantorian set theory, is conceptually incompatible with Kaldor¿s requirements for an empirical science. This aspect of Kaldor¿s critique has not been explored, and as a consequence a major source of substantiating his critique has remained undeveloped.