The Shortcomings of the Classical Economic Model

Abstract

Free market capitalist economics is a very powerful set of ideas, now very much in vogue in Central Asia. When its main rival, communism or state-planned socialist economics, was discredited and abandoned in the Soviet Union and Eastern Europe, and to a large extent also in China, Western-style free market economics became the only viable economic theory available for governments to run and organise their societies. The only values which appear in classical economic models are those that can be quantified by being assigned monetary weightings. Classical economic theory holds that all participants in the market between supply and demand have 'perfect information' about the facts surrounding and supporting their choices. Classical economic theory also contains questionable assumptions about what is valuable in the future as opposed to the present. Capitalist economic theory considers consumption to be the sole end and purpose of all economic activity, taking production factors like land, labour and capital as the means.