Neoclassical economics

Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits by income-constrained firms employing available information and factors of production, in accordance with rational choice theory.[1] Neoclassical economics dominates microeconomics, and together with Keynesian economics forms the neoclassical synthesis, which dominates mainstream economics today.[2] There have been many critiques of neoclassical economics, often incorporated into newer versions of neoclassical theory as human awareness of economic criteria changes.

The term was originally introduced by Thorstein Veblen in 1900, in his Preconceptions of Economic Science, to distinguish marginalists in the tradition of Alfred Marshall from those in the Austrian School.[3][4][5]

"No attempt will here be made even to pass a verdict on the relative claims of the recognized two or three main "schools" of theory, beyond the somewhat obvious finding that, for the purpose in hand, the so-called Austrian school is scarcely distinguishable from the neo-classical, unless it be in the different distribution of emphasis. The divergence between the modernized classical views, on the one hand, and the historical and Marxist schools, on the other hand, is wider, so much so, indeed, as to bar out a consideration of the postulates of the latter under the same head of inquiry with the former." - Veblen

It was later used by John Hicks, George Stigler, and others[6] to include the work of Carl Menger, William Stanley Jevons, John Bates Clark and many others.[4] Today it is usually used to refer to mainstream economics, although it has also been used as an umbrella term encompassing a number of other schools of thought,[7] notably excluding institutional economics, various historical schools of economics, and Marxian economics, in addition to various other heterodox approaches to economics.

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Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits by income-constrained firms employing available information and factors of production, in accordance with rational choice theory.[1] Neoclassical economics dominates microeconomics, and together with Keynesian economics forms the neoclassical synthesis, which dominates mainstream economics today.[2] There have been many critiques of neoclassical economics, often incorporated into newer versions of neoclassical theory as human awareness of economic criteria changes.