Neoclassical economics: science or neoliberal ideology?
This paper calls for a new approach to economic theorising in the aftermath of the global financial crisis of 2007â€“2008. We examine two key theories which suggest that markets are stable self-correcting efficient systems. These theories, namely General Equilibrium Theory and the Efficient Markets Hypothesis, are at the heart of neoclassical economics and give neoliberal ideology much of its intellectual legitimacy. We demonstrate the flaws in these theories and the misleading prescriptions they provide for public policy. We suggest that these theories have survived, despite their inherent weaknesses, not as objective science but as ideology, and specifically allied to neoliberal ideology. We advocate a fundamental change of approach.
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Volume (Year): 10 (2013)
Issue (Month): 3 (December)
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References listed on IDEAS
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- LeRoy, Stephen F, 1976. "Efficient Capital Markets: Comment," Journal of Finance, American Finance Association, vol. 31(1), pages 139-141, March.
- Rosenberg, Alexander, 1992. "Economics--Mathematical Politics or Science of Diminishing Returns?," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226727233, July.
- David Slattery & Joseph G. Nellis, 2011. "Rethinking the Role of Regulation in the Aftermath of the Global Financial Crisis: The Case of the UK," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(3), pages 407-423, September.
- Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
- Clower, Robert & Leijonhufvud, Axel, 1975. "The Coordination of Economic Activities: A Keynesian Perspective," American Economic Review, American Economic Association, vol. 65(2), pages 182-188, May.
- Smith, Eric & Foley, Duncan K., 2008. "Classical thermodynamics and economic general equilibrium theory," Journal of Economic Dynamics and Control, Elsevier, vol. 32(1), pages 7-65, January.
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