Austrian and Post-Keynesian Criticisms of the Standard Neoclassical Essay - 1

Austrian and Post-Keynesian Criticisms of the Standard Neoclassical View of the Competitive Process - Essay Example This research will begin with the statement that the neo-classical view of the competitive process believes that the perfectly competitive approach it describes the essence of capitalist competition in the market. The attributes of the process are viewed as exceptional and typically arising from government intervention, which includes protection and nationalization. The criticism points out that the basic motivator of the capitalist process, competition, ensures that if any firm enjoys super-normal profits, rivals will soon enter to bid away those profits. They will succeed to undermine any temporally market dominance that the incumbent enjoys. According to Nolan, Post Keynesians school of thought has been criticized by many schools on the issue of economic policies of the evolution of power operating in the capital market. They argue that the changes in the strength of demand cause changes in the level of prices with the respect to costs. These changes tend to have a strong influenc e on the society propensity to save or to consume and thereby changing the level of effective demand to make it correspond with the available supply. Thus, capitalism naturally initiates full employment level provided the income distribution adjustment is allowed to adjust itself to the economy. In the short run, some kind of Keynesian policies will be required but the process will be essentially governed by price flexibility relatively to wage costs. The post-Keynesian believes that the changes in the strength of demand cause changes in the level of prices with the respect to costs. These changes lead to the great influence on the consumer propensity to save or to consume and thereby changing the level of effective demand to make it correspond with the available supply. On the other hand, the Austrian school of thoughts has received criticism on the way they view the strength of demand. They argue that market participants who obtain more and more on accurate and complete perfect kn owledge depend on potential demand and supply preferences.