Neoclassical Quotes

Neoclassical economics insists that advertising cannot force consumers to buy anything they don't already want to buy. (Christopher Lasch)

We need to augment and amend the existing body of classical and neoclassical economic theory to achieve a more realistic picture of economic process.

Herbert Simon

I would guess that most MIT Ph. D.'s since 1980 might deem themselves not to be "Keynesians.” But they, and modern economists everywhere, do use models like those of Samuelson, Modigliani, Solow, and Tobin. Professor Martin Feldstein, my Harvard neighbor, complained at the 350th Anniversary of Harvard that Keynesians had tried to poison his sophomore mind against saving. Tobin and I on the same panel took this amiss, since both of us since 1955 had been favoring a "neoclassical synthesis,” in which full employment with an austere fiscal budget would add to capital formation in preparation for a coming demographic turnaround.

Paul Samuelson

Writers after Coase have referred to the authority structure of the firm as a "visible hand" that works in combination with Smith's invisible hand. The everyday fact that employers exercise power over their employees - not news to most employees - had been a central theme in Marx's economics, but it was (and generally continues to be) overlooked by most neoclassical economists. Early in his studies Coase noted the similarity between the hierarchical organization of capitalist firms, with their reliance on command relations, and the then-existing system of centralized economic planning in the Communist countries, where production was carried out in accordance with orders from higher authorities and where market competition played little role.

Samuel Bowles

The theory of repeated games is able to account for phenomena such as altruism, cooperation, trust, loyalty, revenge, threats (self-destructive or otherwise) – phenomena that may at ﬁrst seem irrational – in terms of the "selﬁsh” utility-maximizing paradigm of game theory and neoclassical economics.

Robert Aumann

[The decisionmaking role of the firm has progressed from the neoclassical standpoint of profit maximization to sales maximization, utility maximization, and satisficing. From the Operation Research point of view] ...the ideal picture is that someone, presumable the firm that hires the operations researcher, hands him, on a silver platter, an objective function. By talking to the engineers, or by looking into a few scientific laws, he determines the policy alternatives available and also the model.

Kenneth Arrow

In some respects this is intended to be a revolutionary book, but in other respects it is very traditional indeed. It is revolutionary in that we have developed a comprehensive analytical framework to examine and explain the rise of the Western world; a framework consistent with and complementary to standard neoclassical economic theory.

Douglass North

The decisive weakness in neoclassical and neo-Keynesian economics is not the error in the assumptions by which it elides the problem of power. The capacity for erroneous belief is very great, especially where it coincides with convenience. Rather, in eliding power - in making economics a nonpolitical subject - neoclassical theory destroys its relation to the real world. In that world, power is decisive in what happens. And the problems of that world are increasing both in number and in the depth of their social affliction. In consequence, neoclassical and neo-Keynesian economics is relegating its players to the social sidelines where they either call no plays or use the wrong ones. To change the metaphor, they manipulate levers to which no machinery is attached.

John Kenneth Galbraith

Proving that profit is economically and morally justifiable, rather then the result of exploitation, has been a central preoccupation of neoclassical economists.

Jim Stanford

So Sen is right that democracy can be pressed into the service of reducing injustice. Indeed this can happen against expectations. Had there been neoclassical economists around in the late eighteenth century, they would have scoffed at the possibility of abolishing the slave trade. In the absence of a system of multilateral enforcement, Britain had to bear the enormous expense unilaterally-over several decades-without any obvious prospect of a return. whether democracy fosters or hinders economic growth.

Ian Shapiro

The stampede toward "rational expectations” - widely thought to be a "revolution,” though it was only a generalization of the neoclassical idea of equilibrium-derailed the expectations-driven model building that had just left the station. In the end, this way of modeling has not illuminated how the world economy works. (Edmund Phelps)

Economics has paid a terrible price for its dalliances with the Keynesian and neoclassical theories.

Edmund Phelps

Pirates are the very essence of profit maximising entrepreneurs described in neoclassical economics. Yet, whilst films such as 'The Pirates of the Caribbean' and 'Butch Cassidy and the Sundance Kid' have gone a long way to popularise both pirates and outlaw behaviour, the truth of the matter is that piracy is illegal, and it kills.

Peter Middlebrook

The equilibrium price level is determined at the point where the money market is in equilibrium. The temporary suspension of Walras' Law, far from making economic nonsense, thus appears as the crucial "trick" by which the tatonnement process is decomposed in two parts. This analysis confirms that for a neoclassical general equilibrium system with neutral money there is indeed a consistent decomposition procedure, based on appropriate compensation principles, permitting the determination of real variables in the real sector while the price level is determined in the monetary sector. However, the amount of intellectual effort which, in the wake of Lange and Patinkin, was devoted to this issue, is entirely out of proportion to its economic significance. The real economic question is not whether a system can be dichotomized, but whether money is neutral.

Jürg Niehans

Global rationality, the rationality of neoclassical theory, assumes that the decision maker has a comprehensive, consistent utility function, knows all the alternatives that are available for choice, can compute the expected value of utility associated with each alternative, and chooses the alternative that maximizes expected utility. Bounded rationality, a rationality that is consistent with our knowledge of actual human choice behavior, assumes that the decision maker must search for alternatives, has egregiously incomplete and inaccurate knowledge about the consequences of actions, and chooses actions that are expected to be satisfactory.

Herbert Simon

If the state is the executive committee of the great corporation and the planning system, it is partly because neoclassical economics is its instrument for neutralizing the suspicion that this is so.

John Kenneth Galbraith

The strength of capitalism does not lie in the neoclassical idea of stability, but in its ability to unleash this creative energy. like a chaotic mathematical system, it is capable of producing surprise.

David Orrell

Not only is Homo economicus self-centered, he is a murdering psychopath. However, as with much of neoclassical economic thought, there is an element of circularity here.

David Orrell

If the aim of economics is really to provide the greatest happiness to the most people, than it is rather shocking to discover that economic growth has no net effect on happiness. So what has gone wrong with the neoclassical prospect?

David Orrell

The neoclassical dogma of diminishing returns is completely wrong - success begets success and wealth begets wealth.

David Orrell

The Ethics of Competition is a book of Frank H. Knight's writings on a common theme: the problem of social control and its various implications. Knight believed in free economic institutions but was also aware that the competitive economic system could be improved. One of the central figures of neoclassical economics in the twentieth century, Knight pursued a lifelong campaign against irrationalities of nationalism, religious fanaticism, and group conflict, while conceding that these were fundamental orientations of human action that might yet frustrate his own work as an economist. While Knight vigorously defended human freedom and the liberal order, he also was sufficiently moved by the shortcomings of liberalism as to condemn it as rife with abuse. (Frank Knight)

The entire thrust of neoclassical thought is to argue that the free market economy is an efficient system that will optimize utility for all mankind, if only government will get out of the way. It therefore departs from classical economists such as Adam Smith, who recognized the importance of governments for regulating markets and preventing monopolies.

David Orrell

The real reason for the longevity of the neoclassical model have less to do with science, and more to do with the social dynamics of the universities that propagate it, and its appeal to a particular mindset.

David Orrell

Knowledge management often generates theories that are too general or abstract to be easily testable. In some cases, simulation modeling can help. [WE have developed] an agent-based simulation model derived from a conceptual framework, the Information Space or I-Space and use it to explore the differences between a neoclassical and a Schumpeterian information environment.

Max Boisot