The readings for Friday offer us the author's critique on Neoclassical Economics. The author describe several guiding and mathematical principles used in Neoclassical thinking as well as a few of the shakier concepts that it is based on. In short, consumers will always seek to get the highest utility within their means, and entrepreneurs will always seek the greatest profit. According to Neoclassical Economics as long as consumers and entrepreneurs fulfill their duties in this regard social welfare will benefit. It is postulated that their is a 'bliss point' or a Pareto Optimum in which once all labor and capital is harnessed for maximum efficiency individuals living standards will be as good as they can get.
As our authors point out, Neoclassical economists take it for granted the a free market capitalist society will always work toward this 'bliss point' for granted, and that if you consider other possibilities it doesn't hold up based on the mathematical principles they've put forward. His other critique is on the methodology used in Neoclassical microeconomics which take individual human choices as being constant and uniform. Using Hedonist psychology, it is assumed that all goods have the same worth to everyone, and that all human behavior is based on maximizing utility based on that. The way that society reaches the bliss point is through 'Pareto improvements' which are changes that increase the welfare of some or all without decreasing the welfare of anyone.
Why do you think, as our author claims, that Neoclassical economics the most prevalent school of economic thought today? If we say that the bliss point is just an arrow with Neoclassical Economics being the bulls eye painted around it is there anything that could be realistically substituted that would allow these theories to still hold true?
I think that Neoclassical economics is the most prevalent school of economic thought today for a couple of reasons. Power is the first. This economic doctrine most often benefits the "haves" and not the "have-nots." The "haves" have wealth and therefore power. Textbook companies, high school and collegiate, are a controversial business that is easily molded by powerful lobbyists. The powerful that benefit from our current economic thought use their influence to ensure that economic textbooks continue to show preference for Neoclassical economics. Current views of capitalism has become a "way of life" and any stray or change is almost viewed as un-American.
ReplyDeleteI personally don't think I'm equipped with the knowledge to suggest realistic substitutes that would allow the theories to still hold true, but the video we watched this morning exposed me to some possible solutions, or the path to create a better capitalist economy ( link: http://www.youtube.com/watch?v=qOP2V_np2c0 ).
I completely agree with Tyler, in today's society the Economic doctrine is alive and well. All the power goes straight to all the people with money (the have, who included CEO's, wealthy business owners,and others that have large sums of money) whereas the working class has truly no power over anything than their own lives. Lobbyist do help mold other industries by merging with their own. In my economics class I took over the summer, we talked about how the NRA (National Riffle Association) was lobbing for George W. Bush in the 2000 Presidential election. They kept saying that Democratic President candidate Al Gore was "trying to take our guns". With the NRA backing Bush and donating money to his Presidential campaign, they influenced a good majority of people to vote for Bush in the election. This is the same idea of the haves holding the power and influencing the have nots in a manner that involved all people.
ReplyDelete