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Supply and Demand Is Not a Neoclassical Concern

Lima, Gerson P. (2015): Supply and Demand Is Not a Neoclassical Concern.

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The central point of this paper is the demonstration that there is a real world supply and demand theory, supported by an estimate of the US aggregate supply curve. The fundamental idea is that demand and supply interaction is the smallest economic act, an act without which there would be no economics. Paper’s first point is that what neoclassical textbooks call supply and demand is just a disguising device created to justify a given goal and stresses three mistakes that plague all profit maximisation models thus condemning the neoclassical approach to unfeasibility: the notions of competition and equilibrium and the econometrics of disequilibrium data. The second point is the proposal of rescuing and improving the approach to the supply and demand theory prevailing before the upsurge of the neoclassical doctrine. Fundamental assumptions are three; first, supply and demand generates price and production of all relevant products and services, being thus the immediate cause of all economic outcomes: (un)employment, income, tax receipts, etc., and their social consequences on education, wealth distribution, and so forth. Second, supply and demand interplay depends on several exogenous factors, mainly human ontological behaviour, economic policy and natural resources; exogenous phenomena, especially the economic policy, command supply and demand and supply and demand commands the economy. Third, production takes time; quantities produced and sold are never equal; disequilibrium is the usual status of the supply and demand interaction and therefore the entire economy. Econometrics of the experiment described deals with disequilibrium without using the time series method and gives support to the proposed economic structure and theory.

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