Neoclassical economics: Science or neoliberal ideology?

Abstract

This paper calls for a new approach to economic theorising in the aftermath of the global financial crisis of 2007-2008. We examine two key theories which suggest that markets are stable self-correcting efficient systems. These theories, namely General Equilibrium Theory and the Efficient Markets Hypothesis, are at the heart of neoclassical economics and give neoliberal ideology much of its intellectual legitimacy. We demonstrate the flaws in these theories and the misleading prescriptions they provide for public policy. We suggest that these theories have survived, despite their inherent weaknesses, not as objective science but as ideology, and specifically allied to neoliberal ideology. We advocate a fundamental change of approach.