Neoclassical economics: bullsh*t dressed as science

By Ani Seed

Do you often wonder how the mysterious ‘economy’ works? It’s so central to our lives; we engage in it just about every day and it’s pretty important in determining how our society works. Economics is the study of the making, distributing and using of stuff (both material things and services). There are heaps of different theories and ways of looking at the economy which focus on the various parts of the complicated system, but before you zone out and turn the page, don’t worry this will get juicy.

The current mainstream theory is called Neoclassical Economics. This is what is mainly taught in universities, and those who learn it go on to be a big part of the decision making process in our society. Hopefully understanding a bit more about the assumptions and conclusions of this pervasive theory will help you understand a little more about why our society is the way it is.

Neoclassical economics comes from the much more down-to-earth theories that understood the importance of power, historical context, psychology and other important things, but along the way some people decided to pretend it could be simplified into a science. It went from being called political economy to economics, signalling a conceptual shift from economics as a subjective and changing field to one dealing in absolute truths with its central thoughts explained in graphs and numbers. How can complicated ideas around how resources are distributed in a society with inequalities and complicated human nature be put into a graph you ask? Pretend like all humans have the same unchanging wants of course! Pretend like humans are completely rational all the time, and have perfect information about everything, including predicting the future. Sound bizarre? This is just one part of the loss of common sense that neoclassical economics exhibits.

In fear of this turning into a rant against neoclassical economics (which — for the sake of transparency — I am very much capable of, as I am harbouring a lot of anger against the way it impacts our world) I will add that of course it has its useful bits. It is usual to try and measure things in an uncertain world. All theories that look into the economy are useful, so we shouldn’t just throw it in the bin. Though there is definitely a part of my brain that wants to do just that — proving once again that we are not solely rational beings.