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Supply and Demand Is Not a Neoclassical Concern

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  • Lima, Gerson P.

Abstract

The central point of this paper is the demonstration that there is a real world supply and demand theory, supported by an estimate of the US aggregate supply curve. The fundamental idea is that demand and supply interaction is the smallest economic act, an act without which there would be no economics. Paper’s first point is that what neoclassical textbooks call supply and demand is just a disguising device created to justify a given goal and stresses three mistakes that plague all profit maximisation models thus condemning the neoclassical approach to unfeasibility: the notions of competition and equilibrium and the econometrics of disequilibrium data. The second point is the proposal of rescuing and improving the approach to the supply and demand theory prevailing before the upsurge of the neoclassical doctrine. Fundamental assumptions are three; first, supply and demand generates price and production of all relevant products and services, being thus the immediate cause of all economic outcomes: (un)employment, income, tax receipts, etc., and their social consequences on education, wealth distribution, and so forth. Second, supply and demand interplay depends on several exogenous factors, mainly human ontological behaviour, economic policy and natural resources; exogenous phenomena, especially the economic policy, command supply and demand and supply and demand commands the economy. Third, production takes time; quantities produced and sold are never equal; disequilibrium is the usual status of the supply and demand interaction and therefore the entire economy. Econometrics of the experiment described deals with disequilibrium without using the time series method and gives support to the proposed economic structure and theory.

Suggested Citation

  • Lima, Gerson P., 2015. "Supply and Demand Is Not a Neoclassical Concern," MPRA Paper 63135, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:63135
    as

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    File URL: https://mpra.ub.uni-muenchen.de/63135/1/MPRA_paper_63135.pdf
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    References listed on IDEAS

    as
    1. Grieve, Roy H, 2014. "'Right Back Where We Started From': From 'The Classics' To Keynes, And Back Again," SIRE Discussion Papers 2014-001, Scottish Institute for Research in Economics (SIRE).
    2. Zaman, Asad & Saglam, Ismail, 2010. "The conflict between general equilibrium and the Marshallian cross," MPRA Paper 33256, University Library of Munich, Germany.
    3. Frederic S. Lee, 2010. "A heterodox teaching of neoclassical microeconomic theory," International Journal of Pluralism and Economics Education, Inderscience Enterprises Ltd, vol. 1(3), pages 203-235.
    4. Joan Robinson, 1969. "The Economics of Imperfect Competition," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-1-349-15320-6.
    5. Frederic Lee & Steve Keen, 2004. "The Incoherent Emperor: A Heterodox Critique of Neoclassical Microeconomic Theory," Review of Social Economy, Taylor & Francis Journals, vol. 62(2), pages 169-199.
    6. Roy H Grieve, 2014. "‘Right Back Where We Started From’: from ‘the Classics’ to Keynes, and back again," Working Papers 1401, University of Strathclyde Business School, Department of Economics.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Economic theory; equilibrium; supply and demand.;
    All these keywords.

    JEL classification:

    • A11 - General Economics and Teaching - - General Economics - - - Role of Economics; Role of Economists
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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