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August 22, 2009
Markets, private property and minimal government will achieve maximum welfare. Isn't that the core of neoclassical economics? Isn't that what is meant by the phrase 'thinking like an economist'? That markets, functioning on their own without interference, tended to an interdependence described as "general equilibrium." Neoclassical economists normally treat economic instability as the effect of exogenous, stochastic factors and not as endogenous to capitalist social formations--- economic fluctuations are seen as created by the processes of capitalism itself. So the economy is an equilibrium system regulated by nature in the same way as the solar system lends weight to the claim that such an economy exists in harmony and is best left to itself without government intervention.
The standard points of contention are that humans aren't rational, or not nearly as rational as the theory would have them be (and, further, that in the aggregate this creates market failures). Other points are that humans are social creatures, not individual agents, and their preferences and behaviors are forged by social structures: institutions, habits, social mores and culture all mediate and drive economic behavior. Others say that price and value aren't interchangeable and that prices don't arise from the simple intersection of supply and demand curves, while some argue that unequal power between different sectors of society affects how markets operate.
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