Post Four: the Neoclassicists

Versetti, Angel. “History of the Neoclassical Economics – Analysis of Failures of the Neoclassical Thought.” Academia, 2010.

Summary: Versetti is very critical of Neoclassicalism in his essay, but he provides a succinct and understandable definition of what Neoclassicalism is. He gives a list of three elements:

1. People will behave rationally
2. Demand for products is static
3. The market is self-regulating

These three points lead to very easy mathematical models. Neoclassicalism has much simpler math than Neokeynesian models, and is still a somewhat accurate model of the economy.

Versetti says that Neoclassical thought has failed because those three assumptions are overly simplistic, and although the Neoclassicists have some good ideas, it is ultimately not a sufficiently powerful model. Not all literature agrees with this idea, or else Neoclassicalists wouldn’t exist, but Neoclassicism being simple and not a very accurate model seems to be the sentiment shared by many economists. For example, here’s a quote from a random guy I took from quotefancy.com because I need an image for this very dry not-image-heavy subject:

Analysis: Although Neoclassical economics is the least respected field of economics that still has a major presence today, it still has a very large influence on politicians and public policy, and is therefore important to understand. I think the reason for this is that simpler models create better talking points and easier public policy decisions – “the invisible hand will take care of it” is easier than “these differential equations say you need to raise taxes”.

That’s not to say that all Neoclassicists are stupid or corrupt, however. There are some subfields of Neoclassicism such as Monetarism, Neoclassical-Keynesian, and New Classical that are much more respected economic theories.

I feel like the hardest part of this paper will be fitting into 10 pages or whatever. Which is funny since three hours ago I thought I would have to start talking about Communism and Socialism to make the length.