The neoclassical economics theory has proven to be durable and the most popularly taught school of modern-day economics. The theories stressed in neoclassical economic teachings fit like a custom-made glove in a world that is increasingly globalized and democratized. Neoclassical economics theory focuses on the micro and individual level of the market, rather than the broader and macro system of economics. As a result, the classic chicken-or-the-egg riddle is asked when looking at the relationship between neoclassical economics theory and individualism in a society: Is it the principles of free market individualism and independent economic influence that shapes the democratization and focus on the individual in a society, or is it open political institutions as well as shifts in cultural attitudes that breed neoclassical economics?
Neoclassical economists invert what has long been assumed by economists and sociologists: while other economists argue that individual behavior is influenced by surrounding economic institutions and social norms, neoclassical economists conclude that to understand a country’s economy requires an understanding of its people. The dimension of individualism attached to the Continue reading to THE ARTICLE »
“It is common to distinguish necessaries, comforts, and luxuries,” wrote influential economist Alfred Marshall. “The first class including all things required to meet wants which must be satisfied, while the latter consist of things that meet wants of a less urgent character.” Marshall’s discernment between the various dimensions of the material economy – the influence of price, distinguishing human needs and wants, the utility of goods and services – allowed him to become not only an architect of neoclassical economics, but it allowed him to transform economics as a whole. For Alfred Marshall, immature economics had resulted in mass exploitation, plenty of poverty, and unequal distribution of wealth. This revealed much about the deficiencies in the study of economics as much as it did about its implementation: In his influential 1890 text The Principles of Economics, Marshall wrote about his urge to develop economics because “the study of the causes of poverty is the study of the causes of the degradation of a large part of mankind.” To understand economics required not only a moral dimension to be assigned to it, but it also required studying the political economy and social landscape of communities.
Although his drive was based on the inequality around him, Alfred Marshall was not a Marxist theorist in which he condemned the struggle between Continue reading to THE ARTICLE »
The concept of marginal utility arose as rejection of the labor theory of value that had previously been espoused by neoclassical economists. Economists such as Adam Smith taught that the classical labor theory of value argued that the value – or utility – of a commodity was determined by three important factors that went into a product’s creation: the amount of labor that went into producing it, the effort required of the labor, and/or the amount of labor expected of others in exchange of the product. With the turn of the 19th century, this economic theory was challenged by other schools of thought that believed that there were many ignored factors that determined the utility of a product, mainly the marginal utility theorists. Continue reading to THE ARTICLE »
“The difficulty lies not in the new ideas, but in escaping from the old ones,” wrote British economist John Maynard Keynes in his 1935 text The General Theory of Employment, Interest and Money. “As these old ideas ramify, for those brought up as most of us have been, into every corner of our minds.” Keynes was a maverick economist. The popular school of economic thought in the early 20th century stressed the importance of the micro level and private sector of economics in influencing the public and macro level institutions of the economy. The popular thought was that because humans were rational in their pursuit to maximize their commodities and satisfaction, the free market would remain efficient and operate properly because it offered the best opportunity for individuals to create an economy that could insure maximum utility. In the wake of an economic collapse during the Great Depression, John Keynes launched what would be known as an economic “Keynesian Revolution” that stressed the importance of the mixed economy: one that valued the neoclassical importance of the micro level, with the need for accountability and stability protected by the macro level. Continue reading to THE ARTICLE »
The creators of neoclassical economics differentiated from other schools of economics in their understanding of what determines the utility of a commodity in the market. At the height of the Industrial Revolution, the market place was understood in terms of classical economic theory. In his text The Wealth of Nations, Adam Smith explained that the labour theory of value ruled that the value of a product was linked to the “the toil and trouble of acquiring it.” The value of an item was determined by the costs and effort invested in producing it. As the intensification of industrialization started settling down, a new breed of economists began to interpret what influenced value from a different perspective. Neoclassical economists started moving away from classical economists views of the market from the macro-level, and diverted more attention to the micro-level. For the creators of neoclassical economics, the most important determiner of utility of a product was not in any concrete value in and of itself, but value was mainly determined by consumer’s own perception. Continue reading to THE ARTICLE »
