Neoclassical Economics Theory

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
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Game Theory in Neoclassical Economics

The triumph of capitalism and the free market society was altogether unsurprising for neoclassical economists. The reason for this is because the individualistic and independent element of the free market best complements their views on human nature. On the whole, individuals are rational in always viewing situations with self-interest. As a result, humans are continuously looking for ways to maximize their profits or satisfaction in their daily life, while minimizing their losses. This competitive and maximum utility characteristic in people makes a market that stresses the importance of advantage and individualism the most effective way in channeling their nature while insuring the opportunity of satisfying this human need. However, in addition to individuals and institutions attempting to maximize their self-interest in absolute terms, neoclassical economists view a large part of the equation is maximizing individual self-interest in relative terms too. Neoclassical economics sought to make economics a more grounded study by incorporating elements of mathematics, biology, politics, and social science to make it more relatable to the common worker engaged in the market. When looking at relative advantage in the market,
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Keynesian Theory in Neoclassical Economics

The story of the rise of Keynesian economics is fascinating. From the late 19th century onwards, neoclassical economics theory dominated the mainstream discourse of macro and microeconomics. Under the assumption that humans are rationale and their decisions are rooted in efforts to maximize the utility of their purchasing power, neoclassical economics theory stressed the importance of microeconomics influence on macro level markets. Heavily reliant on mathematical models and statistics, neoclassical economics theory asserted that a free market and a focus on individualistic methodology offered reliable foundations by which to navigate and forecast maximum utility in a marketplace. Yet, neoclassical economists’ belief in the fixed behaviors of individuals desire to maximize profit in their daily life has felt increased scrutiny as the global economy has shown itself to be more
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