Week 2: Neoclassical Economics & Evolutionary Economics Flashcards
(20 cards)
Q: What is the central element of Neoclassical Economics?
A: Markets, as they enable mutually beneficial exchanges and efficient resource allocation.
Q: What are the core assumptions of Neoclassical competitive markets?
A: Homogeneous goods, many firms, price-taking behavior, perfect information.
Q: What is the role of self-interest in Neoclassical Economics?
A: It drives individuals toward equilibrium and ensures the highest welfare for society.
Q: How do consumers behave in Neoclassical theory?
A: They seek to maximize utility, choosing the best combination of goods within budget constraints.
Q: What is an indifference curve?
A: A curve showing combinations of goods that provide the same level of utility to a consumer.
Q: What does the marginal rate of substitution (MRS) indicate?
A: The rate at which a consumer is willing to substitute one good for another while maintaining utility.
Q: What happens at the point where a budget line is tangent to an indifference curve?
A: It is the equilibrium where the consumer maximizes utility given their budget.
Q: How do firms behave in Neoclassical Economics?
A: Firms maximize profit where P = MR = MC in competitive markets.
Q: What justifies state intervention in Neoclassical Economics?
A: To correct market failures like public goods and externalities.
Q: What is a criticism of Neoclassical Economics according to Institutionalists?
A: It relies on unrealistic abstractions and ignores social, legal, and institutional context.
Q: Who is Thorstein Veblen and what did he criticize?
A: An Institutional economist who criticized utility and self-interest, noting consumerism and predatory business behavior.
Q: What did John Kenneth Galbraith argue about capitalism?
A: Capitalism is shaped by technology, with companies acting as planners in the economy.
Q: What is Evolutionary Economics?
A: A perspective viewing the economy as a dynamic, evolving system shaped by innovation and adaptation.
Q: What is ‘path dependency’ in Evolutionary Economics?
A: The idea that historical choices can lock systems into suboptimal outcomes (e.g., QWERTY keyboard).
Q: What is a key policy principle in Evolutionary Economics?
A: The best policy emerges through experimentation and adaptation (trial and error).
Q: What is the ‘Entrepreneurial State’ concept by Mazzucato?
A: The state as a risk-taker and innovation driver, not just a market corrector.
Q: What is a Mission-Oriented Policy according to Mazzucato?
A: A policy with a clear goal that organizes public and private efforts toward solving grand challenges.
Q: What is Mazzucato’s criticism of Market Failure Theory (MFT)?
A: That it sees the state only as a fixer rather than a leader in economic direction-setting.
Q: Give an example of the Entrepreneurial State in action.
A: U.S. Department of Energy loans to Tesla ($465M) and Solyndra ($500M).
Q: How do Institutional and Evolutionary Economics differ?
A: Institutional focuses on rules and norms; Evolutionary emphasizes change, innovation, and historical development.
