Answer to Question #2303 in Macroeconomics for Denise

Question

Strengths and weaknesses of Neoclassical Economics

Answer 1

Strengths and weaknesses of Neoclassical Economics
Strengs:
1) This theory created a unified system, which combined classical and marginal methodological achievements, such as “laisses—faire” principle, justification of marginal indicators etc., and the researching of man’s activity and his rational& nature.
2) Active use of quantitative research methods for analyzing and evaluating economic phenomena and processes of individual subjects economic activity that enabled widely used mathematical apparatus.
Weaknesses:
1) The attention was given only to microeconomic analysis, but macroeconomic level, the problems of growth and development of the economy were ignored.
2) Neglects the function of aggregate demand, while claiming that only the supply can affect the demand.
3) Recognizing that the main instrument of regulating the economy is the monetary policy.
4)& quot;Scientificization" or "mathematization" of economics – this theory ignors& irrationality of life and tries to squeeze an infinite variety of economics phenomena in dry rational schemes and abstractions. It describes a man as a perfect being, which completely controls itself and its actions are aimed exclusively at achieving utility. But maximization as a strong form of rationalization not always adequately describe the behavior of economic agents in the real economic life.