Whitehead’s fallacy of misplaced concreteness and the unfortunate uselessness of all monetary-macro theory micro-founded on Walrasian-Pareto general equilibrium theory

Abstract

Abstract Whitehead’s fallacy of misplaced concreteness (FMC) explains the ‘unfortunate uselessness’ into which all monetary-macro theory ‘micro-founded’ on Walrasian-Pareto general equilibrium (GE) theory has blundered. The FMC occurs because the misuse of the Walrasian-Pareto GE idealisation results in mistakes in reasoning when applied to monetary-macro theory. Consequently, theorists who employ the Walrasian GE idealisation as a foundation for monetary-macro theory are caught on the horns of a dilemma. Either money is appended when it is not required, violating the principles of monetary theory or money is abolished, (the ‘cashless limit’) and theorists are forced to change the meaning of words and economic concepts, in the process deceiving themselves and the reader. This paper provides a general explanation of the way all models based on the Walrasian-Pareto GE idealisation commit the FMC. There is no escape if the Walrasian GE idealisation is retained; models that employ it are unscientific and should be abandoned.