31/1/2018 Why neoliberalism is harmful (4)

Summing up, I have mentioned that neoliberalism is harmful because of the following reasons:
(1) It considers only partial efficiency. It does not consider the efficiency of whole society.
(2) In particular it does not discuss organization efficiency since the production functions are exogenously given, even though firms are its object of analysis.
(3) Hence, it claims that the economy is efficient however lazy or untrustworthy the individuals are.
(4) Similarly, it does not consider how family members can become happy.
(5) Even the markets in the real economy are very likely to be inefficient because complete contracts are impossible due to astronomically high transaction costs.
(6) It does not consider many factors that make the consumer happy such as her good human relations with others, her kindness to others, or the happiness of her descendants.
(7) Therefore policies based on neoliberalism tend to generate inefficient firms (organizations), households, communities, or environments.
              There are many other factors that make neoclassical economics unrealistic. One of them is uncertainty. The market allocation of resources becomes theoretically efficient under uncertainty only if contingent commodity markets exist. Contingent commodities are theoretically devised goods that are distinguished not only by physical and chemical traits but also by the future states of nature in which transactions will be carried out. Since there are almost an infinite number of future states of nature, the number of contingent commodities is that number times the number of goods that are distinguished by physical and chemical traits. Even if the markets with contingent commodities are efficient in theory, it is impossibly costly to organize such a large number of markets in the real economy.
              All philosophies, theories, and religions are examples of paradigms that are devised by abstracting the real world. Each of them claims something by taking in convenient facts and ignoring inconvenient ones. Studying neoclassical economics makes this clear. After studying it, we will become more modest.
             
Comments and questions are welcome.
Kazuhiro Arai’s English twitter:        https://twitter.com/araikazuhiroe88
Kazuhiro Arai’s Japanese blog:         https://araikazuhiro.blogspot.jp/
Kazuhiro Arai’s Japanese twitter:      https://twitter.com/araikazuhiro88
Kazuhiro Arai’s Japanese home page:   http://araikazuhiro.world.coocan.jp/







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