According to John Maurice Clark, the American economist, the neoclassical economics approach does have three major pillars, the rational assumption of the individual, the maximization of the profit or income, and finally the perfect market assumption. Having said that, in order to gauge the impact of such a school of thought, three apparatuses are required, namely, prices, the distribution of the income within the market measured through the supply and demand, and the output. In doing so, the results would give an indication about the implication of the neoclassical economics from a supporter’s point of view, yet there are myriads of critiques for such a school. However, four main critiques that challenged the authenticity of neoclassical economics are the following: a disciplinary science, the moral, political and explanatory critiques.
The first critique for the theory is related to the assumption of the perfect market in which the competition does occur perfectly. In fact, such assumption is very hindering, for it does not consider the role of the major firms and companies that most of the time manipulate, in a way or another, the market (Galbraith, 1973 & Gruchy, 1973). In other words, the adoption of a normative methodology is aberrant in a sense where the neoclassical theorists apply the theories as if it “resembles their model, not the empirical world” (Eichner & Kregel, 1975).
The theory emphasizes on the rationality of the human being as if the buyer or seller is more of an economic man that weights between the cost and benefit of every transaction. A torrent of criticism has been directed towards such assumption for the lacking perception of the human being and how is involved in the real world. The ordinary people when they go to the market to purchase any product, goods or even food, they never think of the economic theories built upon the rational choice, but rather it is totally a spontaneous process. Accordingly, such importance given to the individual was perceived, after the Second World War, as not merely restricted to the individual, but could be fostered through the government intervention, unlike to the orthodoxy economics orientation (Anderson, 1960).
As for the second critique, the moral critique founded its criticism on the notion that the main principles have been reduced to a checklist where the economists and political scientists are solely technicians (Graham, 1944). Also, the economists were reproached for the adoption of a new trend that encourages for a free value judgment approach that depends on mathematics or any rigorous expression (Heilbroner, 1970).
The nature of economics went through many troubling normative values, which accounted for a new resurrection. Duncan MacRae summarized such a new orientation as a development meant to be a self-contained science (MacRae, 1973). Concerning the new transformation that meant to divest economics from the "controversial valuative concerns", there two variations on it. The first of which is championed Heilbroner who justifies the new process under the distinction between the advocative role and the scientific role. Heilbroner expounded that the early is not to have a say on the value judgement arena; however, it is main function is to provide information that would facilitate the decision-making.
The second variation tries to clarify the amoral trend of economics as not the outcome of the economists, but what the political philosophy's abdication yielded to. According to Joseph Crossey, it was induced by the improper perception about the relationship's basis. The problem is originated in the relationship with the natural law and its modern comprehension as restricting it to be an end, not a means. Therefore, it could be alleviated only throw reviving the hegemony of political philosophy (Staniland, 1985).
The third critique does revolve around the fact that the element of power is wholeheartedly neglected, for assuming having a perfect competition ensues depicting the society in which everybody has no power. Suffice to say, the most obvious counterargument for such a neoclassical assumption is the rise of monopolies (Klein, 1980). It was clear enough that the formation of the overemphasis on the individual while not considering other powers is fallacious.
In a broader scope, the explanatory critique builds on the criticism of unassuming the power factor. It is concerned and articulated by the advocates of development. They argue that the neoclassical approach is non-economic factors oriented; it excludes many vital factors, like politics, beliefs, norms and practises. Consequently, such premise implies how shallow and narrow the neoclassical approach is. The shaping of a consumer’s preference is formed by many factors such as the power of the social system, the social class, the culture, and other mechanisms.
I think the aforementioned critiques were to enlighten the reader about the variety of perceptions concerning the role and assumptions of neoclassical economics. On one hand, the critiques exposed the lack of the comprehensive way of analyzing the roots of the economic problems. Such deficiency exacerbated the dilemma of poverty and even the individual because it dealt with the symptoms of the problem not the core roots. On the other hand, the depletion or separation between economics and other social sciences was another major issue for a deeper understanding of the critiques. If I to summarize the critiques, I would say that it could be divided into two main categories; critiques from the within and the out. The earlier is more about improving the methodology by having a wider inclusive framework and means, whereas the later is about a fierce criticism for the structure of the school itself. Therefore, I think relating the most important critique -from my perspective- to the Third World countries would elaborate fabulously.
The Third World countries are characterized by very different cultures, norms and ideologies from the western countries from which neoclassical economics emerged. Historically speaking, these differences induced many obstacles that got escalated, indeed, by the advent of colonialism. Concerning the political arena, the political scientist and philosopher Francis Fukuyama has adopted the same hypothesis; the focal point will be spot about the potential World War as an ideological and religious struggle (Fukuyama, 2006).
The orthodoxy economics had fallen in the same trap when the World Bank and the IMF gave loans for the African countries. The loans were accompanied by the Structural Adjustment Program (SAP) that was meant to ease and facilitate the discourse of development for the countries (Lensink, 1996). In fact, the SAP profoundly lacked the notion that those countries have different soil and nature. Such a culture-blind ideology devastated the countries; they end up stuck paying the interest of the loan that exceeded the original loan by millions. From another perspective, neglecting the cultural and ideological differences, particularly in Africa, could be interpreted as being the manifestation of a Eurocentric approach mimicking the discourse of the white man’s burden. Therefore, it has been utilized as a new mean for Neo-Imperialism where the militarily intervention is no longer required. For example, Egypt signed the SAP loan with the IMF in 1991, yet the rapid pace of privatization had its severe negative implications on poverty in 1995 and 1996 (El-Saharty, Richardson and Chase, 2005).
In conclusion, I want to highlight the fact that the neoclassical economics as other social sciences does deal with the economic arena from a one Eurocentric perspective. This approach is the major point of weakness that limits the feasibility of such a school in other regions. The exclusion of other social sciences and only resorting to the rigorous presentation by using mathematics was the second major weakness that stripped economics, and in return the neoclassical economics, the benefit of incorporating other approaches for a more precise understanding and analysis. The trend for privatizing the economy and subordinating the market to the nature of the prices for empowering the individual backfired the concept itself. Unlikely, the intervention of the government for regulating the economy was a mean through which many major industries were built, like in the Latin America, Egypt or even Iran and the Asian tigers.
References
Anderson, W. (1960). The Politics of Political Economist. Journal of Economics, 669.
Clark, J. (1944). Educational Function of Economics after the War. American Economic, 34.
Eichner, A and Kregel, J. (1975) "An Essay on Post-Keynesian Theory: A New Paradigm in Economics". Journal of Economic Literature, 13(4), pp. 1293-1314.
El-Saharty, S, Richardsom, G & Chase, S (2005). Egypt and the Millennium Development Goals: Challenges and Opportunities. Washington DC, World Bank.
Fukuyama, F. (2006). The End of History and the Last Man Free Press; Reissue edition
Galbraith, J. K. (1973). Power and the Useful Economist . American Economic Review, 1-11.
Graham, F. (1944). Disscussion. American Economic Association.
Gruchy, A. (1973). Law, Politics, and Instituional Economics. Journal of Economic Issues, 625.
Heilbroner, R. (1970). On the Possibility of a Political Economics. Journal of Economic Issues.
Klien, P. (1980). Confronting Power in Economic: A Pragmatic Evaluation. Journal of Economic Issues. 14(4), PP: 871-896.
Lensink, R. (1996). Structural adjustment in Sub-Saharan Africa (1st ed.). Longman.
MacRae, D. (1973). Normative Assumption in the Study of Public Choise. Public Choice, 28.
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