History of Economic Thought. Neoliberalism (most important)

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History of Economic Thought. Neoliberalism (most important)

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78. NEOLIBERALISM

Neoliberalism rooted in economics A. Smith. It was his principle of "invisible hand", confidence that the realization of a self-serving person in the field of economic activity will lead to public welfare, and the requirement arising from this point of view government intervention in the economy formed the basis of the concept of representatives of neoliberalism. The origin of this theory is L. Mises (1881-1973), professor at the University of Vienna. His most famous work "Socialism" (1922).

Mises criticizes the central link of the socialist system - planning. Under socialism, where there is no mechanism for competitive bidding for resources and where the buyer does not have to pay the cost of the best alternative to use them, resources will be used inefficiently and thoughtlessly.

Under socialism, a system of arbitrary assessments dominates, which gave rise to Mises call socialism a system of planned chaos.

The strengthening of the role of the state will inevitably lead to the strengthening of the role of the bureaucracy.

The negative consequences of bureaucracy are:

1) corruption, decreased efficiency of social production;

2) the emergence of a certain type of person for whom "following the usual and outdated is the main of all virtues", and the "suffocation" of innovators who are the only carriers of economic progress.

The free market corresponds to democratic principles, here the consumer is the center of the economic system, "voting" with his money income for a particular product, thereby determining the structure of social production, and only under these conditions do economic entities maximize their well-being, having the freedom to choose alternative opportunities.

Development of ideas Mises continued by his follower F. Hayek.

F. Hayek (1899-1988) - Austrian economist and sociologist. He considered market not as a human invention and not as a mechanism for the realization of justice and the optimal allocation of resources, but as a spontaneous economic order that simply connects competing goals, but does not guarantee which of these goals will be achieved in the first place.

Market effect is to increase the ability of all of us to achieve our own goals. This is due to the most important function of the market - dissemination of knowledge.

Keynesian direction in economic theory considers competition as imperfect and extremely costly economic mechanism achieving balance.

Neoclassical direction regards the competition as a fast and efficient way to optimally allocate resources.

Hayek sees competition as a "discovery procedure," a way of discovering new products and technologies that, without recourse to it, would remain unknown. It is competition that forces the entrepreneur to look for new products in search of high profits, to use new markets for raw materials, to look for precisely those very new combinations of production that ensure the dynamic development of the economic system. This belief of Hayek is another argument against central planning.

Author: Tatarnikov E.A.

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