LAKATOS AND THE ASSUMPTION OF THE NEUTRALITY OF MONEY IN NEOCLASSICAL ECONOMICS

Abstract

Using Imre Lakatos’ concepts concerning research programmes, it is shown that the assumption of the neutrality of money belongs to the hard core of neoclassical economics. This conclusion is based on the interrelation of the concept of the neutrality of money and that of efficient equilibria, a key notion of neoclassical economics. By showing that utility-maximizing equilibria determined by the private market do not necessarily exist if money is not assumed to be neutral, I prove that the neutrality of money is a necessary assumption for the existence of efficient equilibria. Furthermore, it will be shown that unscientific ad hoc modifications are utilized to protect this assumption, and that the research programme of neoclassical economics is hence degenerating.