In the history of the economy, it is possible to find many brands that reflect the various paradigm shifts. For example, the change in the economy in the 20th century, from a classical thought to neoclassical one, was the cause of new thoughts about wealth.
Many of the differences between both theories, can be attributed to the drastic deviation from the idea of value. Where I go from a perspective of value as a function of production, to an idea of value referring to perception.
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In this article you will find:
Difference in the usefulness of both theories
The main difference between classical and neoclassical economics, lies in this particular concept of utility.
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When it comes to theories of value, growth and work, Utility is absent in the classical theory of economics. In the classic modelThis equilibrium was based on interest rates, wages and salaries, and not on supply and demand.
Instead, when it comes to neoclassical economics, the utility acquires a high importance, where the equilibrium is based on the function of supply and demand in the markets according to the scarcity and utility of the goods.
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Value perspective difference
As for the value, the way of seeing it in both theories is totally different. When it comes to a classical economics, this value refers to the cost of production only. So it is considered as a property that cannot be separated, or in other words it is inherent.
Instead, value in neoclassical theory of economics it is interpreted according to supply and demand, prices and supply. Being a perceived property. In other words, the value refers to the utility in the neoclassical vision, Meanwhile in the classic it only highlights the cost of it.
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Definition regarding balance
Like the foregoing, both definitions regarding the Balance they are totally different. Meanwhile in neoclassical economics, equilibrium is produced at the instant where supply and demand intersect, or the aggregate supply and demand curves. In classical economics this equilibrium is produced only when investment is fully covered by savings.
Because both are based on totally different thoughts, it is one of the main differences to highlight between both theories.
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Difference in profit
The classical school, considers the benefit as a payment to the investor for the function that he is performing, which is useful. In neoclassical economics, the benefit is defined in a more practical way, referring to the surpassing of the income obtained over the expenses incurred.
Rationality in both theories
Rationality is not based on classical theoryHowever, in the neoclassical theory makes an appearance. In this perspective, neoclassical economists they have rational preferences, guiding behavior in terms of buying and selling, seeking to maximize profits and utility. In classical economics, no distinction is made from this rational thought, so the benefits are equivalent to the salary received by the workers.
