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Manchester 2019 The Magnificent Failure of Neoclassical Economics

Summary:
Virtually every time Neoclassical Economists explored the stability of an equilibrium in one of their models, they found it was unstable. How did they react to this discovery? By either ignoring it, or by using elaborate workarounds to avoid it. In the process, their analysis has gone from Walras’ original vision of a simple price ...

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Virtually every time Neoclassical Economists explored the stability of an equilibrium in one of their models, they found it was unstable. How did they react to this discovery? By either ignoring it, or by using elaborate workarounds to avoid it.



In the process, their analysis has gone from Walras’ original vision of a simple price adjustment process which could lead to all markets being in equilibrium at once, with agents knowing only their own tastes, their existing stocks of different commodities, and current prices, to a world inhabited by so-called “rational agents”, where the definition of “rational” is effectively “has the capacity to accurately predict the future”.



For economics to progress, the equilibrium fetish of Neoclassical Economics has to be abandoned. It is possible today to model capitalism as a dynamic, far-from-equilibrium, complex system that it a far better description of what it actually is.



Steve Keen
Steve Keen (born 28 March 1953) is an Australian-born, British-based economist and author. He considers himself a post-Keynesian, criticising neoclassical economics as inconsistent, unscientific and empirically unsupported. The major influences on Keen's thinking about economics include John Maynard Keynes, Karl Marx, Hyman Minsky, Piero Sraffa, Augusto Graziani, Joseph Alois Schumpeter, Thorstein Veblen, and François Quesnay.

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