Neoclassical Economics
Neoclassical economics is the dominant school of economic thought that has shaped most of the modern world's economic policies, especially since the late 19th and 20th centuries. It tries to explain how markets work through individual decision-making, supply and demand, and rational behavior.
At its core, neoclassical economics is built on a few key assumptions:
Humans are rational agents who aim to maximize utility (for consumers) or profit (for producers).
Markets are efficient and, if left alone, will naturally find equilibrium (balance between supply and demand).
Competition drives innovation and efficiency.
Value is determined by marginal utility — the value of the next unit consumed or produced.
Government intervention should be minimal — the market knows best.
These ideas are mathematically elegant, appealingly simple, and dangerously disconnected from the real world. While neoclassical economics has informed growth and innovation in some areas, its widespread dominance has also helped drive inequality, environmental collapse, and financial instability. Some examples are:
Rising inequalities
Neoclassical models treat inequality as either irrelevant or “efficient” — assuming that the market rewards people fairly based on their productivity.
In reality, it ignores power, inheritance, discrimination, and exploitation.
The result? A world where billionaires hoard more wealth than entire countries, while essential workers struggle to afford housing, education, or healthcare.
Environmental destruction
Neoclassical economics treats nature as a “resource” — something with a price tag to be extracted and exploited.
Pollution? Deforestation? Climate change? All classified as “externalities” — side effects the market doesn’t price in unless forced to.
This mindset has allowed unchecked exploitation of ecosystems, fossil fuel dependence, and the myth of infinite growth on a finite planet.
"The invisible hand doesn’t care if the planet burns — as long as the quarterly profits go up."
Financial Crises
By promoting deregulated markets and assuming humans always make rational choices, neoclassical economics helped lay the groundwork for massive economic crashes — like the 2008 global financial crisis.
Banks took insane risks, believing the market would “self-correct.” It didn’t. The poor paid the price while the rich got bailouts.
Cold, Dehumanizing Policy
Human beings in neoclassical models are just numbers — “rational agents” who don’t suffer, love, or break down under stress.
This leads to policy decisions that undervalue mental health, community, care work, and culture — all things that don't fit neatly into profit calculations.
Colonial Legacy and Global Exploitation
The neoclassical framework often justifies economic systems that exploit poorer nations for the benefit of wealthier ones — through cheap labor, resource extraction, and debt traps.
It masks modern imperialism under the language of “efficiency” and “free trade.”
Beyond all these, Neoclassical economics still underpins much of what is taught in schools, what governments prioritize, and how corporations operate. It creates a world where:
GDP is more important than human wellbeing.
A corporation can destroy a rainforest and call it economic development.
A nurse earns less than a hedge fund manager and the model says that’s "efficient allocation of resources".
If you are interested to know more about this model, we recommend to start digging further here.