Neoclassical economics is a theory that explores the production, pricing and consumption of goods from the perspectives of supply and demand (Ayres, 2020). It emerged in the 1900s to compete with what was prevalent at the close of the 19th century. An important assumption of neoclassical economics in the theories of classical economics is that the most important factor in determining the value of a product or service is its utility to consumers (Ayres, 2020). This is based on the assumption that a consumer’s major concern when purchasing a good or service is the maximization of personal satisfaction. In that regard, all purchasing decisions are based on the product’s utility value. The theory also suggests that the value of any product or good surpasses its cost of production. Neoclassical economists promote inequality and ignore exploitation by promoting the principle that under capitalism, an upper limit to the number of profits that an enterprise can make is nonexistent (Ayres, 2020). This is based on the assumption that the price of a product is determined by consumer perception. In order to maximize profits, capitalists have to exploit human labor more, as it is the only means of production. This leads to massive exploitation and inequality because few people in society possess the resources to maximize labor exploitation. Neoclassical economists also argue that labor rights and living conditions are directly related to the rate of economic growth (Ayres, 2020). Therefore, the improvement of people’s living standards is predicated on economic growth, which is based on capital expansion and labor exploitation.
Karl Marx developed the concept of vulgar economics to describe a system of anti-scientific theories that were aimed at describing economic processes in a superficial manner in order to promote capitalism. The system was developed to justify the wealth of capitalists and constrain the concept of labor within the wages system. Trade unions were described as unnecessary market monopolies. However, it ignored the fact that capitalists had a monopoly on the means of production and distribution (Ayres, 2020). Marx was against these superficial theories that did not represent the reality of capitalism. Vulgar economists justify the inequality and ignore exploitation under capitalists by defending the interests of capitalists and advocating for the morality of the profit system. Moreover, it paints an illusory appearance of capitalism as a near-perfect economic system by describing it as the best of all possible options (Ayres, 2020). The main weakness of vulgar economics is its focus on the outward appearance of things and not the underlying principles that give it meaning. Class, class domination, and class power are examples of the deeper characteristics of capitalism that vulgar and neoclassical economists try to conceal beneath superficial theories that lack scientific foundations (Ayres, 2020). Vulgar economics ignores the immense influence of factors like social systems, modes of production, social relationships and class struggle in capitalist systems. Instead, it focuses on factors such as commodities and capital. Inequality increases under capitalism because of the lack of instruments to check capital accumulation.
References
Ayres, R. U. (2020). On capitalism and inequality: progress and poverty revisited. Springer.
DeMartino, G. F., & McCloskey, D. N. (2016). The Oxford handbook of professional economic ethics. Oxford University Press.
Hausman, D., McPherson, M., & Satz, D. (2017). Economic analysis, moral philosophy, and public policy (3rd ed.). Cambridge University Press.
Hodgson, G. M. (2015). Conceptualizing Capitalism: Institutions, evolution, future. The University of Chicago Press.