The Top 10 Flaws of Neoclassical Economics
Unfortunately, Damon Vrabel’s Renaissance series of videos has been taken down and his site is no longer available – the reasons are not clear. However, this summary remains, and remains instructive as to why neoclassical economics fails in its analysis. Essentially, neoclassical economics ignores the activities of the banks, erroneously assuming their role to be the ‘middle man’ between depositor and investor. Crucially (and perhaps in some cases, deliberately), neoclassical economists miss the overarching financial sector which leeches wealth from the real economy to the small number of oligarchs who constitute the entrenched private monopoly which effectively controls the global economy.
Revisiting Economics 101 – Debt: Imperial Power and Control discusses the power of debt-based money, emboded in the bond market, and its ability to exert total top-down power and control. Learn how our system is not a free market and how neoclassical economics misses so many key points.
The top 10 flaws of Neoclassical Economics according to Damon Vrabel http://csper.org/economics-2.html
1. Money monopoly = free market
Neoclassical economics calls our current system under a private monetary monopoly a free market. Of course nothing could be further from the truth.
The monetary system is an overlay on top of the economic system. Economic systems create value through market activity, but the monetary system which overarches them, determine who captures their value.
Neoclassical economics completely ignores the monetary system, and the fact that it is controlled by an entrenched private monopoly.
2. Neoclassical Economics ignores that money comes from nothing but debt.
Economics does not address the fact that all money comes from debt. It assumes that base currency (M0, core money) is just a free-flowing medium of exchange that apparently comes from the US Treasury. It does not. It comes from the Federal Reserve backed by debt.
3. Neoclassical Economics ignores the artificial scarcity condition.
Economics ignores how a debt-based monetary system imposes scarcity on countries and populations. There is never enough money to pay back all the debt, so everyone is forced to jump on the hamster wheel, scrambling to find more money to pay back debt. This dynamic is perpetual. It never stops until the system crashes. It need not be this way.
4. Neoclassical Economics equates net worth with value creation.
Economics ignores how the financial class and others serving the upper end of the capital structure capture more money simply because they have entrenched power. They extract value. They do not create it. Economics is correct that participants in the economic system create value, but it misses the fact that the monetary system on top of the economic system determines who captures that value.
5. Neoclassical Economics assumes free, rational, economic actors by ignoring power differential of debt.
The power differential caused by the monetary system is ignored by economics. This is the only reason the system is erroneously called a “free market.” The monetary system is entirely centripetal, sucking all power to the center, or the top-tiered financiers. People are in servitude in a very controlling market, not a free market.
6. Neoclassical Economics ignores the instability of having a pure debt-based monetary system.
Economists ignore that the economic system is guaranteed to boom, bust, and eventually end – because the monetary system on top of it, is completely unstable and fundamentally flawed. It depends upon increasing debt. It cannot increase forever, and it can collapse to zero since people have no sovereign money.
7. Neoclassical Economics ignores the wealth illusion.
By not addressing the issue of debt-based money, economics fools people into believing the digits in their bank accounts equate to their wealth. But the fact is they represent a conditional liability, i.e. somebody else’s debt. This becomes obvious during deflation. The illusion is reinforced during inflationary periods.
8. Neoclassical Economics ignores perpetual exponential growth.
Unimaginably, economists ignore the most severe flaw of the monetary system that drives our economic system—it requires exponential growth. This guarantees eventual failure, but neoclassical economics conveniently assumes that problem away.
9. Neoclassical Economics ignores perpetual increasing scale.
As a result of perpetual exponential growth, institutions in the system continually get bigger and bigger. We saw this as the economic system made towns, counties, and states irrelevant through the last century, and we are now seeing it as mega banks and corporations are now making national governments irrelevant. People are now living as tiny cogs in a machine of incomprehensible scale. Everything in life has been monetized, so things that don’t generate bank credit get devalued (spirituality, psychology, rest, joy, play, etc).
10. Neoclassical Economics ignores perpetual increasing velocity.
Another problem from exponential growth is perpetually increasing velocity. The system has to chug faster and harder as it continues to grow. This means human life has to chug faster and harder. The most obvious manifestation of this is the endless, hectic commutes every morning to jobs we despise. We feel frustration, sometimes rage, toward our fellow commuters. That is just one small example of how systemic velocity affects the human spirit.
further reading:
Politics and Parasites 