In most of the faculties of universities around the world in Economic courses the students learn neoclassical economic principles in analyzing economic issues. In addition, neoclassical economic way of thought is well accepted by most of the Economists in formulating economic policies and gives advice to government and business entities. However, there exists an alternative economic principle which challenges neoclassical economic principles on theoretical level and also from the methodological and empirical basis. In this article I will discuss the main neo classical economic principles fallacies the heterodox paradigms challenges.
Objections to Neoclassical Subtexts
In my definition the subtext means the tacit assumptions of neoclassical economic analysis and the prime motivation of this analysis. The prime object or purpose of neoclassical economic analysis is to facilitate economic efficiency and economic growth. As well, the linked assertion that perfect markets do these best or real markets do this reasonably well compared to policy makers attempt to solve the prime object of facilitating economic efficiency and economic growth by other non-market processes.
In other words paradigmatic and normative dimensions of these subtexts give more preference to efficiency than equity and give more preference to market activities than non-market activities under the positivist façade. However, it is tricky to highlight the fallacies of other neoclassical economic principles such as concept of scarcity, efficiency, opportunity cost, exogenously given trade-offs and production possibilities frontier as a common sense way of economic analysis. But carefully reading this subtext assumes the peoples appetites as exogenously given and defecting attention from other potential subjects. For example the neoclassical micro economic principles aggressively exclude the ideas of Political economists like Fred Hirsch and Richard Easterlin that economies produces people and distribution of power and there fore the trade offs and peoples needs are produced by the economic system and the trade offs may not be exogenous as assumed by neoclassical economic principles. That is the neoclassical economic principles aggressively exclude other paradigms without any empirical evidence or logical analysis.
In some neoclassical economic text books they assume that democracies prefer markets or markets leads to democracies and if markets are not present it leads to dictatorship. But this tacit assumption is not based on logical reasoning or on empirical evidence As well, the meaning democracy is a red herring. In effect, the neoclassical assumption implies that markets are good in all socio-economic and cultural settings. In effect the neo classical economic assumptions and economic principles are not based on empirical evidence or logical reasoning but based on ideological grounds and there fore it can be said the relationship between political and economic system is based on ideology than on analytical grounds.
In addition, the specificity of neoclassical subtext can be illuminated by identifying the alternative subtexts and tacit assumptions of heterodox paradigms. In these paradigms they have skepticism about markets and to fully explore the societal implication. In addition, in these paradigms they have a greater concern for equity than the neoclassical thought and skepticism of markets to meet the full range of human needs. The heterodox paradigms also have a greater concern that market has on environmental externalities than by neoclassical economists.
Methodological Objections to neoclassical Analysis
Neo Classical Analysis and its principles are defended on the basis of Positivist epistemology. In Neoclassical perspectives Economics at is core an empirical science and its principles are based on empirical testing and based on Scientific methods used in physical sciences. As well, Economist uses Scientific method in studying economic issues. The intent is clearly to command belief that neoclassical principles are based on empirical testing and its conclusions are irrefutable. However neoclassical economic perspectives give greater attention to the paradigmatic nature of knowledge. That is as the choice of paradigm is subjective; positivist approach to studying economics has a subjective and normative element. In other words, social systems tend to produce cultural and ideological justification than purely based on facts to formulate theories in economics. For example when economic knowledge is treated as a product of social context (reason in context rather than reason in the abstract), it is easier to assert the need to give special attention to the concerns to the disadvantaged. That is the social system tends to produce ideological and cultural justification for their social order or social hierarchy. There fore as claimed by neoclassical economists the positivist epistemology can have subjective element as well as normative element and there fore it can view the economy not wholly on objective sense but can be based partially on ideological basis. For example, the market is the most efficient economic system and close to optimal according to neoclassical economics may not be wholly true statement based on neoclassical economic analysis in all social context and in all historical periods because as economic knowledge is socially embedded and paradigm choice is subjective as well as normative even using positivist approach it may define economics as a command of belief to justify the social system and inequality rather then purely on empirical evidence.
