Neoclassical Economics: A Framework of Failure

Mainstream economic thinking has dominated US policy for decades, but its influence has had disastrous consequences, argues James K. Galbraith in his new book The Power to Destroy.

Galbraith, a professor at the Lyndon B. Johnson School of Public Affairs and a heterodox economist, argues that the neoclassical economics framework, also known as equilibrium economics, has led policymakers astray.

The framework assumes that markets can self-regulate and that governments should only intervene in case of problems with market functioning. However, Galbraith contends that this view is overly simplistic and ignores the crucial role of government in creating a regulatory framework for markets to function.

Galbraith critiques the Federal Reserve's actions in response to inflation in 2021 and 2022, arguing that raising interest rates has no direct connection to controlling prices. Instead, it can lead to economic contraction and job losses.