Did "Neoclassical Economics" - A Rather Strange Set Of Assumptions About How Humans And Organizations Make Economic Choices - Bastardize And Distort The Whole Way Our World Is Governed?

[HistoryIsComplex]

For those who don't know, Classical Economics used to peg the value of a good - a tool, a product, a type of food, a house or car - more or less on how much it cost to produce:

 

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In classical economics, the labor theory of value asserts that the economic value of a good or service is determined by the total amount of socially necessary labor required to produce it.

 

Neoclassical Economics on the other hand brought in (incomplete) theories of "selfish individuals always trying to maximize their utility/gain", "selfish companies/firms trying to maximize their profit" and - strangely - everybody somehow making Economic decisions based on "perfect information".

 

In other words, the new Economics model pegged the value of a good not on how much it costs to make, but rather on "how much a selfish individual gains from it" and "how much a selfish company/firm can maximize its profits with it", and stipulated that people somehow have "access to the perfect information" required to make economic choices.

 

What is so WRONG with this model?

 

It reduced both private persons and firms to utterly selfish economic actors who "always do whatever furthers their self-interest the most".

 

In other words, it saw it as COMPLETELY NORMAL for a company to always do "WHATEVER MAXIMIZES PROFIT", even though this can greatly damage the PUBLIC GOOD.

 

I personally believe that this "IT IS OK AND RATIONAL TO DO WHATEVER MAKES THE MOST PROFIT" was DELIBERATELY SPREAD SO THAT LARGE COMPANIES DIDN'T HAVE TO JUSTIFY WHY THEY ARE ACTING AGAINST THE INTERESTS OF BROADER SOCIETY.

 

They were just "COMPANIES DOING WHAT RATIONAL COMPANIES DO", you see?

 

https://en.wikipedia.org/wiki/Neoclassical_economics

 

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It was expressed by E. Roy Weintraub that neoclassical economics rests on three assumptions, although certain branches of neoclassical theory may have different approaches:^[8]

1. People have rational preferences between outcomes that can be identified and associated with values.
2. Individuals maximize utility and firms maximize profits.
3. People act independently on the basis of full and relevant information.

 

1. From the basic assumptions of neoclassical economics comes a wide range of theories about various areas of economic activity. For example, profit maximization lies behind the neoclassical theory of the firm, while the derivation of demand curves leads to an understanding of consumer goods, and the supply curve allows an analysis of the factors of production. Utility maximization is the source for the neoclassical theory of consumption, the derivation of demand curves for consumer goods, and the derivation of labor supply curves and reservation demand.^[10]

 

[Michi713]

The thing about models is they are placing names on phenomena that already exists.  Firms have always acted in the interest of shareholders, people have always acted in self interest.  “The public good“ was only ever considered when governments wished to stick their hands in business and create wealth for themselves. 
 

The fractional reserve banking system began in the 1600s and has been the driving force of business, economies, governments, and manipulation of currencies ever since.  

Keynesian economics asserted that governments should also manipulate the markets, public relations and marketing started to manufacture demand, the corporation was given rights of the individual, derivatives...  

The reality of macroeconomics is a sordid tale of human nature. 

[Steph]

Profiteering corporations, profiteering governments and all the valued consumers and protected citizens get are a pack of marketing slogans to make them happy with the meagre bread the Phoney Tony's are far too good for.