Neo-classical theory

'''Neo-classical theory '''

definition          See http://www.britannica.com/EBchecked/topic/166188/distribution-theory/34236/Components-of-the-neoclassical-or-marginalist-theory'' ''

discussion        “At the heart of neo-classical theory are four basic assumptions about the nature of social relations and economic life. One is the assumption that social outcomes may be explained primarily in terms of the ‘maximizing’ calculations that individuals make about the perceived costs and benefits of future actions (methodological individualism). […]

A second assumption is that individuals possess ‘stable preferences’ for the basic ‘aspects of life,’ including ‘food, honor, prestige, health, benevolence, and especially wealth’ (Gilpin 2001:51). Such preferences, it is argued, are universal, and apply irrespective of status, culture, history or wealth.

A third assumption, and one that is central to neo-classical economics, is the idea that markets emerge ‘naturally’ to coordinate ‘with varying degrees of efficiency’ (Gilpin 2001:51) the actions and preferences of utility maximizing individuals. […]

A final assumption, and one that informs both neo-classical economics and rational choice theory … is the idea that hypothetic-deductive models of individual decision making may form the basis for comparison, generalization and the construction of theory. … Therefore, neo-classical theory embodies the idea that social relations and outcomes may be explained primarily in terms of individualized actions and decisions” (Johnson 2009:5).