The lesson? Neoclassicals suck at coming up with theories of finance, at least according to this paper. Its an interesting paper worth reading, though if you know the calculation debate well enough, you can probably skim it until you reach the part where they talk about finance. Here are a couple of interesting passages:
Against the challenge of the market socialists, Hayek actually highlighted the importance of the competitive market system primarily as a disequilibrium process. But since socialism, the debated concept, was perceived as a market system without capital markets, the debate implicitly touched upon the role of finance (under the simplifying assumption that only capitalists save and borrow). It was the role of finance in generating prices for risk that was obscured by the dominant neoclassical paradigm of perfect competition. From this point of view, Hayek’s argument can be seen as a suggestion that capitalism is unthinkable in the absence of finance, that is, without a market for risk. This is so because the pure market system provides the motives for economic actors to generate and discover the knowledge (‘alertness to and the discovery of as yet unknown information’ Kirzner 1992: 104) which is at the same time to be dispersed and communicated to other parts of the economy.
Mainstream thinking offers an interpretation of the capitalist system by symbolizing capitalist reality in a particular way. It sets forth and reproduces practices containing particular symbols, ideas, concepts, questions and visions that all together comprise what we may call as the symbolic “misrecognition” of reality. Nevertheless there is one element that resists this symbolization and will always do so for mainstream analytical speculations: finance. It is not that mainstream thinking does not have theories of finance; it is that these theories are unable to grasp the fundamental aspects of finance, its crisis-prone character and its key role in the organization of capitalist production.
