2. Neoclassical Economics and Capitalism

This chapter presents the core of neoclassical microeconomics starting with the theory of consumer behaviour and ending with welfare economics. This core of neoclassical microeconomics yields the result that, if allocation of resources is left to market forces, there will take place an optimal or efficient allocation of resources. This result constitutes the basis of the economic policies being followed by the capitalist countries including India today. This chapter develops a critique of this theory and explains why it favours the rich at the expense of the poor. It specifies what the goal of economic policies in a civilized society should be and provides an alternative definition of optimal allocation of resources.