Date of Award


Document Type


Degree Name

Doctor of Philosophy (PhD)



First Advisor

Kenneth E. Boulding

Second Advisor

Frank Hsiao


My thesis attempts to develop an antithesis to the accepted classic doctrine that our economic system is essentially self-adjusting. An analysis of the forces and developmental processes in a dynamic economic system shows that the system functions on a different principle from the classic self-equilibrium process in which gradualism and harmony without conflicting interest are supposed to prevail. Contrary to the classic model, once the system is disturbed by internal or external shocks which trigger a chain reaction, a self-sustaining disequilibrium will prevent the system generating stabilizing forces. I reinstate Keynes' tenet that our system is not self-adjusting, and that once a cyclical downswing is underway, the downswing will be prolonged. In the process of analysis, I attributed the element of uncertainty and organizations I and economic agents I adaptive behavior to uncertainty as the prime cause of acute economic instability. Developing a theory of economic dynamics and applying it to the most significant cataclysms, the Great Depression of 1929-1933 and the oil-induced contraction of 1974-1976, I attempt to demonstrate the implication of the dynamic contractionary process. My theoretical findings support neither the monetary hypothesis by Friedman and Schwartz nor the spending hypothesis developed by the post Keynesians.

The sequence as well as the content of the rest of my thesis is: Chapter I is devoted to the critical probe of the chronological development of economic doctrine since Adam Smith. In Chapter II, I briefly examine the existing methodologic views in economics (Robbins, 1935; Friedman , 1935; J. Robinson, 1936; Samuelson, 1965). Keynes maintained that the lack of generality in the assumptions of classic economics prevented our solving any economic problems of the real world. I try to show that Keynes criticized the classic choice of methodology, yet, he could not extract himself from the deductive method in his General Theory and his criticism of the methodologic choice of the classics generated a mass confusion. I contend that propositions arrived at by pure logic do not reflect reality; the justification of the system must rest in the verification of empirically derived propositions. I propose the inductive method will prove to be superior to the deductive method in scientific analysis. Chapter III deals with the Walrasian General Equilibrium System from an analytic perspective of macroeconomics; Chapter IV is devoted to the critical examination of Marshall Is economic theory, especially the assumption of perfect knowledge on which the existing microfoundation is based. In spite of major efforts, there are serious misconceptions in the concepts of perfect and imperfect markets. in Chapter V, I attempt to eliminate some of these misconceptions. In Chapter VI, I examine the transformations in the decision-making process from the microperspective.

Included in

Economics Commons