Saturday, February 20, 2021

Neoclassical Economists Being Wrong — Robert Vienneau

What is neoclassical economics? (This post draws on something I wrote on Usenet more than a decade ago.) I believe I might have introduced this list of three key assumptions, as noted by Roy Weintraub, into the wikipedia article on the topic:

People have rational preferences between outcomes that can be identified and associated with values.
Individuals maximize utility and firms maximize profits.
People act independently on the basis of full and relevant information.
One should recognize that neoclassical economics is associated with mathematical formalism. So neoclassical economists speaking among the clergy would prefer the language of topology and the algebra of relations for stating their assumptions.

The point of neoclassical economics is to build a theory on those assumptions which emphasizes equilibrium, characterizes economics as the allocation of scarce resources, and justifies supply and demand reasoning. Neoclassical economists wanted to argue:

Equilibrium prices are scarcity indices
Marshall's principle of substitution is generally applicable
Neoclassical economists are unable to state assumptions that justify such reasoning....
Thoughts On Economics
Neoclassical Economists Being Wrong
Robert Vienneau

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