Steven Klees breaks down the shortcomings of neoclassical economics and the need for a new economic paradigm in “Neoclassical Economics is Dead. What Comes Next?” in Evonomics.
The implication of my critique of NCT is that if economic efficiency is meaningless, neoclassical economics is useless. No amount of tinkering will help. Without economic efficiency as its bulwark, capitalism loses its ideological justification other than one that says markets are practically a better allocation device than a command economy. But markets can be circumscribed and regulated in any ways we find reasonable. There need be no justification of externalities or public goods. Equity can be the reason, and there is no equity-efficiency tradeoff, which is all fiction since efficiency is meaningless. There is no reason to stubbornly hang on to NCT and its justification for capitalism in the way that even critical neoclassical economists like Krugman, Reich, Rodrik, and Stigltiz do.
Moreover, in practical, real-world terms, capitalism is the most inefficient system ever invented. Although it produces riches for some, it leaves billions of people at its margins, many fighting to survive, many surviving in precarious positions, environmental destruction built into it, and climate catastrophe almost upon us.
