Chapter4_Neoclassical to failure(Bis)

Chapter4_Neoclassical to failure(Bis) - The Neoclassical...

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The Neoclassical Answer to Failure Chapter 4 The Neoclassical Tradition People are self interested act rationally and efficiently to reach their goals Argue against government regulation and taxation to redistribute wealth Friedrich von Hayek- Individualism More innovation and progress as more things would be tried Reap the benefits of success as people are not altruistic Taxation would hurt all of society reducing initiative Self interests would allow the economy to benefit as collective interests slows the economy’s progress, “The less State, the better” Milton Friedman : believed in using monetary policies by reducing the State size and the removal of fiscal policies such as Nationalization Government intervention - Governments main task is to create the right environment for maximizing potential Neo Classical Liberalism origins: John Locke including Adam Smith, Jeremy Bentham, John Stewart Mill and Alexis de Tocqueville Stressed individualism as the building blocks of society Minimalist state produced a better economy and society Individuals would become more responsible and self-reliant once doing what they enjoyed and did best. Third world governments reexamined their statist development practices after influential politicians in the western world turned away from Statism including: Margaret Thatcher Ronald Reagan Benefitting the third world by: Reducing corruption Eliminating civil-service jobs Releasing resources to the private sector Neo Classical Diagnosis of the Third Worlds illness: Critiques by neoclassical economist that pointed out flaws in the development theory including P.T Bauer who: Studied South East Asian rubber farmers and West African traders - common assumption on third world peoples was that they frowned on individualism - Few private entrepreneurs
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1940s, found that government policies deprived peasant farmers from capital and kept returns on agriculture so low therefore they invested little time on their farms Too large a state stifled entrepreneurship First world was not responsible for the poverty in the third world 1960s- Enough evidence to show that peasants clearly responded to price incentives Harry G. Johnson- “even the poorest producers are susceptible to price incentives” Believed that the market could perform better economic functions
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Chapter4_Neoclassical to failure(Bis) - The Neoclassical...

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