The Neo classical Theory

Neo Classical: Under the banner of Neo classicalism we have changed and introduce so many policies. Neo classical theory assume lot many things like, it considered government involvement as a intervention in public life, free market policies, applies mechanic formula for the growth of human societies, considered that everyone is capable of growing on its own, disregard which class, caste and sex s/he belongs. It portrays each individual – worker, land-owner, and industrialist – as possessing some resource: land, capital, or labour, which it calls ‘factors of production’. The worker hires out his labour; the landowner rents out his land; the capitalist gives the use of his capital. Each does so for a price (the price of hiring labour is wages; the price of hiring land is rent; and the price of hiring capital is the rate of interest). However the orthodox theory of Neo classical was questioned by economist post 1929 Great depression time, explaining the reason for the sinking of the economy ship, why does the assumption of capitalist failed to understanding the upcoming threat. The insight of these economists undermined the entire structure of neoclassical economics. The discipline of political economy developed in a period of rapid change – the era of the rise of capitalism in Europe. Thus Smith and Ricardo were interested to find the driving force of development. They located it in the production of a surplus over the consumption of the labourer, and the accumulation of the surplus in the form of the growth of productive capacity.
It is unquestionable the path chosen by India to overcome the label of undeveloped i.e. neglecting wants of poor people instead focused on rich peoples desires. India got this as a farewell gift by British. Yesterday we were suffering from Wealth drain by British, today we are facing Brain drain.
Looking at the historical approach of the economy, of neo classical in which supply and demand in all markets simultaneously and instantly arrive at equilibrium unlike in regards to Marx’s which considered economy and society as a process a pattern that follows. Neoclassical theory, as we saw, begins and ends with the market. Classical political economy moves on same ground in the additional aspects of sphere of production and Marx’s focus on Humanitarian as civilized society frame work. Largely in this chapter of Economics as Mechanics, the great deal of discussion rotates around Capitalist agendas of orthodox thinker and Pro Neo classicalist and Marx’s. Neo classical approaches overlook and ignore Humanitarian Aspect and became very Individualistic in Nature, and high light only Individual wants and selfish desire, which actually justify every wrong act, it merely talks of ‘advanced’ and ‘backward’ economies. In its view, the difference between the two is merely quantitative: the backward economy has less capital (for example, less industry).
Still many question were unable to solve, like, why there was a need felt to colonies, Marxists extended this to understand the phenomena of colonialism and its development into latter-day imperialism. With the Marxist approach, we can understand how social institutions like caste, race, and gender developed, and in turn their role in shaping particular patterns of economic development.