ListNeoclassical economics: Subject definition List
"Neoclassical economics", as opposed to Classical economics, was developed in the second half of the 19th century. Pioneers were Jevons, Walras, Marshall, Cassel, Menger. The basic theory of neoclassical economics is still taught and used in economic model building today.
The aim of the theory is to determine the quantities of goods produced and consumed, and the prices by which they will be traded. The basic assumptions are that producers tune the exact size of their production by judging whether small increases or decreases make their profit rise or fall. Similarly, consumers are supposed to consider the changes of their utility as a result of exchanging a little of what they possess for a little someone else is willing to exchange for it. These interactive tuning efforts by consumers and producers are thought to result in what is called "equilibrium", a state in which nobody is interested to make any small changes. The prices and quantities of valuables used, produced and consumed in that equilibrium solution are the desired variables resulting. This type of analysis is called statics.
Research concentrates on which of these variables will rise and which will fall as a result of certain external shocks, such as the imposition of different kinds of taxes, tariffs and the change of production possibilities (caused for instance by technical inventions or changes in the availability of work force or industrial capital goods). This type of analysis is called comparative statics. This frame of thinking is are still at the heart of modern economics.
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