I wrote:>>normative assumptions seem inherent in the process of building models. Models, by their very nature, simplify empirical reality in order to understand it. Then you must decide which simplifying assumptions to make. The standard one is "perfect competition without externalities (etc.)" -- so that the standard model involves a clearly normative assumption, saying that the real world is close to being a utopia. ...<<
mbs:> that sounds like a positive assumption to me. a normative one would be that perfect competition is a desirable state, but to assume there is pc, or even that it is inevitable, does not imply it is desirable.< the assumption is both positive and normative. The standard assumption of perfect competition is saying that the real, empirical, world is close to the neoclassical moral ideal (except concerning small matters like equity). That puts the rest of the analysis into context. It encourages the neo-liberal practice of wanting to force the entire world into the market mould. Each "imperfection" that is allowed into the model can be removed, allowing us to move toward the Ideal. This ignores the neoclassical "theory of the second best" which is almost always ignored by the neoclassicals: this theory says that removing the imperfection -- e.g., any non-market way of doing things -- need not improve welfare (even by neoclassical standards) and may make people worse off. JD
