Compare and contrast Austrian and Post-Keynesian criticisms of the Essay

Compare and contrast Austrian and Post-Keynesian criticisms of the standard neoclassical view of the competitive process - Essay Example Essentially, this paper would tackle about the problematic assumptions of the neoclassical model. Specifically, there will be a discussion on the different competitive processes described under the Neoclassical, Austrian, and Post-Keynesian approaches. There will also be a brief comparison between the Austrian and Post-Keynesian critics towards the neoclassical model, based on the different elements scrutinised by both Kirzner and Lavoie. Lastly, this paper will present the proposed alternative lines of thought of Kirzner and Lavoie, in their attempt to correct the mishaps created by the neoclassical model. II. Brief Overview of the Neoclassical Perspective The Neoclassical approach views the real world of market economies to be exactly representative of markets at equilibrium state. It assumes that the world mirrors the interrelationships present in equilibrium condition of the market. It also contends that the market is composed of agents whose maximisation desires fit each otherâ €™s wants (Kirzner, 1997, p.63). ... As long as the price lets demand and supply to intersect, the market will work efficiently. An additional assumption of the Neoclassical approach states that individuals and firms are expected to make rational decisions for their own benefit, so that individuals are expected to make decisions geared towards utility maximisation while firms are assumed to be always aiming for profit maximisation. Lastly, the Neoclassical model assumes that individuals and firms are given full relevant information about the market (Kirzner, 1997, p.63). With all these assumptions, it is not surprising to see economists who perceive the Neoclassical view as some kind of a classic utopia in economics. For some, it failed to account several important characteristics of a market economy. Economists also began to contest the utmost motive of both individuals and firms in the buy, sell, and trade of goods and services. Some of them proposed that firms and individuals are not inherently maximisation-seekers b ecause they also have other ulterior motives in interacting with the market. Last and most importantly, economists start to go back to the question of equilibrium theory set in the neoclassical model. They continue to examine the elements built under this equilibrium model and attempts to invalidate the realism of the theoretical framework set in this assumption. III. Similarities between the Fundamental Characteristics of Austrian and Post-Keynesian Approaches The Fundamental Question on Neoclassical Theory on Markets’ State of Equilibrium Among this multitude of converging economists are Israel Kirzner and Marc Lavoie. Although each of them belongs to different schools of thought, both economists challenge the neoclassical perspective and its critical elements.