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Neoclassical theory of development

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Paul Mangune

on 1 October 2013

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Transcript of Neoclassical theory of development

Neoclassical Theory of Development
Group 4: SOCDEVT A51
Definition
Neoclassical development theory is an economic theory that argues for markets to be free. It means allowing individual actors and private firms to make plans for the economy, and not just the government.
Scope and Limitations
Examples today
Introduction & History
Criticisms of the Neoclassical theory
The focus on individuals in the economy may obscure analysis.
The assumption that individuals act rationally may be viewed as ignoring important aspects of human behavior.
Problems with making the neoclassical general equilibrium theory compatible with an economy that develops over time and includes capital goods.
Barro, R. J., Mankiw, N. G. (2001). Capital mobility in neoclassical models of growth. Retrieved October 1, from http://darp.lse.ac.uk/papersdb/Barro_etal_(AER95).pdf
Neo-classical theory. (n.d.). Academic Kids Encyclopedia. Retrieved October 1, 2013, from www.academickids.com/encyclopedia/index.php/Neo-classical_economics
Vienneau, R. L. (2012, november 3). [Web log message]. Retrieved from http://robertvienneau.blogspot.com/2012/11/the-historical-failure-of-neoclassical.html
• Neoclassical economists, from the 1870s to the 1930s, tried to develop neoclassical theory:

o To include production, including production with previously produced means of production, within the scope of the theory.

o To extend supply and demand-based reasoning to all runs, including the long run.

Nadeau, R. (2008, august 21). Neoclassical economic theory. Retrieved from http://www.eoearth.org/view/article/154813/
Almario, Montito Pama, Kyle
Cazeñas, Clyde Romero, Reghis
Imai, Kiichi Sandico, Luigi
Manalo, Denisse Siy, Gold
Mangune, Paul



Assumptions
Diminishing Returns
Technological Progress
Slow Growth Rate
Scope

- Labor
- Demand for products
Limitations

- Lack of government intervention
- information assymetry
"Neoclassical Economics” – Thorstein Veblen in 1900

• the theory’s origins back to the 1870s through the works of economists William Stanley Jevons, Carl Menger and Leon Walras

• Economists focused on how the perceived utility of goods affected market forces.
* neoclassical economics largely became a study in microeconomics.
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