Neoliberalism has dominated economics and politics for 45 years, despite being based on nothing more than myths, falsehoods, and fantasies that should have discredited the cult promoting it long ago.
This is the audio version, which will not, for reasons I cannot explain, embed this morning. Apologies for that.
This is the transcript:
Neoliberal economics is a work of fiction.
I talk about neoliberal economics quite a lot on this channel, but I realised that I hadn't really put together a video which explains just exactly what I'm talking about and why I think that this whole political ideology and economic theory is based upon a load of twaddle - a technical term - but which I think is appropriate and better than some other words I could have chosen.
There are two strands to this. The first is that we have to look at neoclassical economics and what it has assumed, and then at neoliberal economics and what it has developed from neoclassical economics, and as a consequence, we can draw some conclusions. But we shouldn't see these two strands of thought as isolated from each other because neoliberal economics is the inevitable development of neoclassical economics, and neoclassical economics has been around for a long time, which does not mean that it is in any shape or form right.
So let's go back to that neoclassical economics, something that really developed perhaps with somebody called Alfred Marshall, and in all the theories that followed throughout the 20th century there was developed a type of economics that was essentially deeply, supposedly rational, on the basis that economists wanted to turn their subject into a science, and a science required that they should be able to mathematically manipulate data in a way that they thought could create predictable outcomes, and as a consequence, they needed to put in place a series of assumptions about the behavior of people on which they could build their analysis.
And this is what I'm talking about when I come to the point of saying neoclassical and neoliberal economics are twaddle, because the assumptions that underpin both of them are quite frankly absurd.
Let's look at Neoclassical economics first. The first thing that Neoclassical economics says, and this is driven by its need for a rational mathematical model, is that we ourselves are rational beings. It says we will always seek to maximise our well-being, even though I don't think you've probably ever thought that way.
I bet there have been moments in your life when you have thought, I don't want to do this, or I don't know what to do. I don't know what choice to make. But that doesn't matter. An economist will assume that you did know and that you were rational, and that you always made the right choice based upon the data that was available to you.
And this will also be true of companies, who have never made a mistake because they, too, are always rational, using information in a totally structured and rational way so that the possibility of error is eliminated. This is absurd.
So, too, is the idea that if we behave in this way, we move towards a state of what is called equilibrium. Equilibrium is an optimal situation where our well-being has been maximised; where we are in the best position in which we might be; where we could not change anything and marginally improve our position.
And that word marginal is quite important because the maths that underpins this works out if we can make an incremental change that will marginally improve our position, or not, and if we can't find such a change, then we are at a point of equilibrium. We are, if you like, at the top of the hill, and there is no further we can go. The chart has reached the best point it can reach. That is what equilibrium represents.
And supposedly it is stable. In other words, once we get there, things are going to remain good.
I guarantee you that you do not relate to this experience. I bet you do not think that you are in the best possible place you could be right now. I doubt that you can ever remember a place like that for more than a moment or two. It may have happened on the odd occasion during the course of your life that you have thought, "I am euphoric. This is wonderful. I am at a point of bliss." But it didn't last, because it never does.
This idea of equilibrium is absurd. It is alien to human behaviour. We literally can't understand what bliss, happiness or whatever else we wish to call it is, unless we also know what unhappiness and stress and all those other things are. We live in a world where we understand well-being because we aren't always in that state, and yet economists assume we can be. That is absurd.
They also assume that this point is reached when there is something called perfect competition. Markets then assist us to become optimal in our behaviour by offering us perfect choices because there are any number of competitors in the marketplace, between whom we can choose and who provide us with perfect information about the products that they make available so that we can make a rational choice on which one we want to buy. And if somebody comes up with a good idea that they wish to sell in the marketplace, they will get access to all the capital they need to bring it to market to expand our choice in the way they want.
Is that how you think markets work?
Do you think that anybody could set up a new search engine tomorrow and challenge Google, and around the world, the whole world will be made aware of it immediately? No, of course that's not true.
Do you have a free choice of which water company you buy from in the UK? No, you don't. You have no choice at all.
How many supermarkets can you really choose between, given that you don't want to drive miles to reach one? Not many.
When you get there, do you find free choice or do you find the same brands in every supermarket? You find the same brands.
The point is, this idea of perfect competition and free entry into the market is completely absurd.
There is no such thing as perfect competition.
There is no such thing as perfect knowledge.
There is no perfect access to capital so that new competitors can enter into marketplaces as they wish. It just does not happen.
So this is quite crazy. You cannot do that. You cannot therefore profit maximise because there are barriers that prevent you from doing so. However good your idea, you may not be able to put it into the marketplace and therefore make a profit.
And we can't utility maximise as the economists would have it because there are barriers, because there isn't perfect competition. We are not offered the choices we need. Nor do we have the information that we require to make perfect choices. And even if we did, we don't want to spend all our life thinking about what we want to consume. There are other things to think about as well, thankfully.
So all of this comes up with a logic which is quite ridiculous, despite which it is assumed that our preferences are stable. Now, economists are incredibly keen on this idea. Once we have made a choice, we won't change it. As I've always said to my students, you will, in 2037, go into a pizza restaurant and order the same pizza that you did in 2025, because first of all, it will still be on the menu, and secondly, you will have not changed your mind on what you want to eat in that restaurant between now and then because that's not allowed. Stable preferences require that once you have established your position, you will maintain it. And economists are so sure of this that, actually, when they come to do macroeconomics, they don't even consider individual choice at all. They consider that there is a representative person, a single person with stable preferences who will buy the same thing from now to eternity because they've made up their mind as to what is required, and that is it.
It's as if all that expenditure and advertising will never change our minds on anything.
There will be no new products. There will be no changes. We won't change our preferences over time. We might get bored with putting who knows what - pineapple - on the top of a pizza, if that is your poison, but you will always like it if you did once, apparently.
This is another of those crazy assumptions, and yet, without those assumptions that I've just outlined, none of neoclassical economics works. All its forecasts, all its models, all its maths, everything that they use to predict things; none of them work without those assumptions holding true. And they don't hold true. Not one of them does.
But despite that, neoliberalism took neoclassical economics and then made everything much worse by turning neoclassical economics into not just a new form of economics, but into a political ideology as well.
What did they say? They said, first of all, that free markets are efficient, and that's because there is perfect competition and because everybody has equal access to money and all those other assumptions that are implicit in neoclassical economics, all of which are untrue. They said that if these things held true, then we would end up with the best possible outcome for society by having everything run by markets.
And so as a consequence, they made their next assumption, which is that government must be as small as possible, and we must privatise everything we can and deregulate everything else to the point where markets reign supreme, because that will provide us with optimal outcomes.
Yes. That's worked so well with regard to climate change, and water, and so much else, hasn't it? We all know that's worked to perfection, and yet that is what they believe.
They also believe that everything is our individual responsibility, so we must provide for our healthcare. We must insure for it. We mustn't rely on the state.
We must provide for our children's education. We must not rely on the state.
We must provide for our own pensions. We must not rely on the state.
We must provide for our own housing. The state has no obligation to us.
We must save to provide ourselves with a social safety net in case anything goes wrong or we become long-term sick. We must not rely on the state.
This is our responsibility.
The market must provide, and we must provide. And if it all goes wrong, well, bad luck. That's so sad, but you were so imprudent as to not provide for yourself, even though you didn't have the means to do so. But that just means that it's your fault and not the markets. You were the person daft enough not to make the provision. That is their logic.
And they also believe in global free trade. Which is pretty bizarre when we see what's happening right now with Trump. But he will claim that's exactly what he's trying to do: he would actually say that he's trying to promote global free trade, and it is the barriers that he claims have been put in place by the rest of the world that are preventing it, which he is having to counter with US tariffs to try to create a level playing field between the US and the rest of the world even though the US has the massive advantage of running the world's sole reserve currency, the dollar, which means it doesn't in effect have to pay for half its imports, and yet he has failed to notice that. Global free trade is supposedly the answer to everything, according to the neoliberal, but it clearly doesn't work, and we've actually found that their own politicians are admitting it.
Nor does small government work, of course. Small government is actually the whole Trump agenda. That is why Musk went into all the departments he did and tried to sack as many people as quickly as he could. But all we end up with is chaos, mayhem, confusion, a failure to supply, the removal of the safety net, the removal of education, the undermining of healthcare, and so much else. Small government is actually just designed to penalise the majority of people in the state who need the government to partner them in their lives to ensure they can survive in this world where the odds are stacked against them.
And let's come to the final thing that the neoliberal will believe, and that is that monetarism rules. In other words, interest rate policy must be used to tackle inflation, and it is more important to tackle inflation than to promote full employment. People do not matter; the stability of money does. And why is that? Because the stability of money is essential to make markets operate smoothly in the way that the wealthy think is desirable, and, therefore, we can sacrifice those who haven't got jobs to the altar of the increase in wealth of the already wealthy.
These are the assumptions that neoclassical economics has created within neoliberal economics and which drive our politics. In summary, we have an edifice built upon falsehoods, stupid claims, and facts that can't be supported in practice. Ideologies that have already been shown to fail, and a belief system that is actually more absurd than almost any religion in the world has ever promoted, because this is a belief system.
Neoliberalism and neoclassical economics are belief systems, and the fact is, there is no evidence to support them. And that's why they're dangerous, because at some point, someone, somewhere is going to say they have no clothes on, and people are going to believe them, and then will be left without any alternative form of thinking, because perhaps the most dangerous thing of all about neoliberalism is that it is thought that 92% of all economics professors in the world are now of a neoliberal orientation. They believe this nonsense, and they teach this nonsense to undergraduates, and because of that, this is a self-perpetuating hierarchy of power.
But there is no one inside most economics departments in most universities in the world who is thinking about what happens when this fails? What are the alternatives now?
And they do exist. There are, of course, alternative ways of economic thinking. I try to promote them, but they're not out in the mainstream, and that is why it's so dangerous. Not only is neoliberal economics false, and it's provably false, it's also eliminating the competition to maintain its power. And the fact that it's destroying the competition in ideas is probably the most dangerous thing about it.
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Penis envy. The economists imagined that pushing enough maths into their subject would make it “a hard science” like physics. The idiocy of this has been exposed time and again. The most accessible critique is in the book Complexity by Waldrop. Page 140 profiles a multi-day meeting between physicist & economists @ Santa Fe (Murray Gell Mann was there). Phyisicists referring to economists: “It seemed they were dazzlling themselves with fancy mathematics until they couldn’t see the wood for the trees”. Quite. “Late Soviet Britain” (A Innes) gives a fomal coup de grace to neolibtard idiocies which can be best summed up as “circular reasoning”. The reason the nonesense has lasted so long is due to politicos & a combo of wanting to believe that the political economy could be reduced to simple numbers/formulea, dogmatism/TINA & finally a total lack of curiosity and the ability to ask even simple questions. One only need to look @ the LINO cabinet for all this to be confirmed imbeciles to a man/woman.
For those into a maths heavy critique of mainstream neoliberal / neoclassical equilibrium economics and an dynamic alternative approach by a physicist :
BLATT John [1983] Dynamic Economic Systems
What my MBA taught me about Neo-liberalism was that even though it talks about ‘competition’ the aim and objective is monopoly. In short, Neo-liberalism is monopolism.
I got this insight by looking at strategy in markets – market entry is particularly difficult and risky and the literature was all about acquisitions and mergers. Markets respond to money-power – if they can buy you out, they nullify you by doing doing just that. The cards are stacked because we’ve allowed too many orgs’ to become too powerful and own too much and achieve hegemony. That is what we call ‘success’ – dominance.
This is also consistent with what we have seen of Neo-liberalism in politics – its innate authoritarianism in places like Chile and now the U.S.
In fact, is it not a fact that since Neo-liberal economics is total bollocks – is not Neo-liberalism simply the politics of monopoly and nothing more? In other words I am contending that Neo-liberalism is NOT economics at all. Not even close.
It is not unknown for physicists to create beautiful and complicated mathematical castles in the air. But at the end of the day, the fancy theory needs to explain some phenomenon better than a simpler one, and then make testable predictions. Any beautiful theory can be slain by an ugly fact.
Neoliberal economists don’t seem to be limited by grounding their theory in testable, observable facts. It becomes a dogma. A form of theology, with believers quoting selected phrases from the foundational texts and repeating the received wisdom to each other.
My initial comment might be that economists are perfectly sane, just not in the way that the rest of us are………
The only way I can imagine them is as a cult, believing something that is clearly at odds with reality in a way that even religion is not.
And its implementation relies on enough people being willing to accept the clear harm caused because they don’t see it’s harmful TO THEM
I suppose we can, in a way, be “grateful” that recent history has offered us so many glaring examples of the incompetence, incoherence and inconsistency of neoclassical economics that only corrupt, greedy or deliberately misinformed people would be taken in by it.
(Thames Water, Liz Truss, Donald J Trump, HBOS, A B de Pfeffel Johnson, Fred the Shred, Epstein, Mandelson, the UK energy market, Michael Gove, the BoE Monetary Policy Comittee, Sue Ellen Braverman, Rupert Murdoch, OfWat, Wes Streeting, Lehman Brothers, austerity, David Cameron, Northern Rock, Keir Starmer – just a random selectionof the cream that rose to the top, your mileage may vary).
https://www.bbc.co.uk/news/articles/ckg3g11z6d8o
The theory of neoliberalism meets reality. Will they ever realise there’s nothing left to take?
All points well taken – and recaps many of the things you have said before.<p>
Its the lack of curiosity by media that is troubling, including by BBC economics correspondents – most of whom must know that there are whole schools of heterodox economists – which query the neoliberal/ neoclassical edifice. Even a tentative query as to how the BoE expects keeping interest rates high will tackle inflation due to disruption in Middle East gas and oil supply would help.<p>
Personally I wouldn’t be that troubled by the mathematics as such. The mathematical model is a useful illustrative thought experiment – as to what a perfect market would look like – and how it might reach equilibrium. It is useful and interesting because it shows in clear stark detail – how far from the real world economy, the perfect market is. <p>
As you say – the stupidity lies in the suggestion that because the model has a mathematical solution – it must represent the real world. Ridiculous.
Thanks
I was reminded at the weekend of how the current version of markets, forced on us by neoliberalism has failed.
I was looking to replace an electrical item for the kitchen, a small appliance, so I shopped around. There was, of course, competition for my money. I noted that the item, a blender, was the same price now as seven, eight years ago — everywhere. It’s an item I would describe as part of the discretionary spending economy. For the most part, such items are non-need. We have a choice to buy or not.
Compare that to the part of the economy where we have no choice — the need side. This is where we are fleeced. Housing, and anything to do with that most basic of security, the home. Council tax (property tax) Water, gas, electricity, energy in general, travel, and increasingly food. Power has been given to private money and wealth.
The second-highest read news item on the BBC today is this.
“We can’t justify a £52 lunch”
For many UK households struggling with the cost of living, meals and trips are not an option. But those who previously could afford them say rising prices mean they no longer do it regularly.
“Everything’s gone up,” says Bianca.
https://www.bbc.co.uk/news/articles/ckg3g11z6d8o
And what does government, Lab or Tory, do about it? Little to nothing. Hardly surprising that people are rejecting them. Although one of the answers they are turning to, Reform, would be many times worse.
For the moment, with the likelihood that we will be fleeced further as the latest war and crisis goes on, I didn’t buy the blender. It’s spending I have control of. I will make do with the old one. It’s the spending that I have no control over, where the government make no effort to change where power lies, that concerns me — more so, the closer I get to retirement.
In many areas of our life, markets have failed the majority. Markets have done very well for the minority with the power.
Much to agree with
@MarP…. thank you, an excellent train of thought.
It is in ‘discretionary spending’ that the market is uniquely suited to provide the blender, the television et all.
It is in non-discretionary spending where there is not, nor should there be, any place for ‘the market’.
This comes back to, the oft times referred to by Richard, the market/state balance with each having its place in achieving a society that works to best advantage of all. However the greed of the marketeers means they have pushed their ideology into the areas of society where it enables extraction, which is a far different thing from healthy profit.
What contributes, I believe, to the undercurrent of rage and dissatisfaction in most of us is that the government, with the sole power of regulation and hence the power to affect and control outcomes always accedes to the vested interests of the extractors.
It’s called chokepoint capitalism. Finding a revenue stream that people have to pass through and fleecing them. If there is one group of people who hate capitalism the most, it’s capitalist. They hate competition. Competition is for losers. As for the Market. Google hasn’t made anything since their search engine; they have bought everything else since then. And now their search engine has the monopoly, they have enshitified it so it offers a worse service for sellers and consumers. As for Amazon, they are so big that they are the Market, and they steal from everyone.
It’s all about chokepoints. Iran knows this very well.
The term identity fusion, from psychology, perfectly describes this state of being. The same logic applies to the MAGA and Reform in the UK. Once infected there appears to be no cure.
A direct corollary of neolib economics is what Cory Doctorow terms “Enshittification”, originally describing the process in which online products and services decline in quality over time and which widens out to every aspect of economic activity that we all need to use today whether on the high street or dealing with companies or government agencies.
His latest blog post focuses on monopoly extraction leading to high prices and low wages which we all see from our dealings with these entities.
Worth a read: Understaffing as a form of enshittification
https://pluralistic.net/2026/03/22/nobodys-home/
He is good
Charles Babbage is widely regarded as the father of computing with his ‘analytical engine’.
Was he trying to improve the lot of mankind utilising his mathematical skills? Not a bit of it. He was trying to get rich by applying some kind of logic to predicting the results of horse races.
I suspect many economists have fallen into a similar trap by using maths to predict human activity.
Horse racing is chaotic, like most things bookmakers want people to bet on. Human behaviour is a bit more predictable, yet not always amenable to precise mathematical models. Economists please note. The subject is most useful when it suggests ways to improve the lives(needs)of as many people as possible, given that resources are limited and wants are endless.
By the way, I believe Babbage never made any money on the horses, but I’m pleased he did what he did. I like to think many economists are acting with the best of intentions, but are on the road to hell.
Thank you Richard, for reminding me of all those forgotten “fairy tales” I was taught in that 1979 economics course I undertook as part of my ONC in Government.
Excellent post. Forwarded to all my friends. Succinctly puts the clarification, for many, that books like Prof Steve Keen’s ‘Debunking Economics’ which im currently digesting, over many pages, which won’t appeal to all.
Thanks
I related the story of my husband’s watching of your YouTube videos the other day – and how he had stopped watching. But the algorithm still feeds the initial still to his feed. Today he watched this one – with really great enthusiasm for what you were saying. He was interested in this one due to its title (he has long argued that “economics is fortune telling that people think is news”.). He commented on two aspects: that you were using a microphone and that you seemed more animated and therefore more interesting. This is not data – it’s anecdote – you may or may not be interested.
Thank you.
I always use a microphone.
That is different one. And Covid muted me of late which is why I am recovering this week.
You missed the ‘i’ out for ‘neoliberfail’ in the headline
What worries me, as a socialist and Green, is the extreme efforts made to push ‘horseshoe theory’ onto solutions from both left and right as opposite but equivalent. Green policies are painted as ‘fairy stories’ as the mainstream media and politicians amplify the TINA message about the Extraction Economy; fortunately most people don’t listen to the Rory Stewarts of this world. Unfortunately, they do listen to BBC News and increasingly the Reform Channel. Consequently, reasonable ideas may well be held by the majority (e.g. nationalising water), many would find neoliberal economics bonkers, but they have no voice whatsoever.
This has to be worked 9n.
What worries me is how few people there are to talk sensibly about the Green economic agenda.
There is no horseshoe there.
Not for publication.
Typo: Heading has a superfluous “f”.
I didn’t advise earlier because I thought someone else would have spotted it and didn’t want to bog you down in unnecessary posts. Sorry, I’ll try to do better in future.
Thsnks
I did not notice
While there’s much I agree with here, the idea that “92% of economics profs are neolib” is a very dubious claim. I understand what you mean by “neoliberal” but there is no precise uncontested definition of the word. And “92%” is a weirdly precise (and arrestingly large number – given we know there are many heterodox economists in academia) figure. Where has that claim come from please? If true, I would like to use it myself.
Fabulous thanks. Late to this party, but wanted to share some thoughts on FTF and systems practice, my own field.
FTF are creating second order change by changing the assumptions and rules that underpin the system’s equilibrium, including the system’s assumptions about equilibrium.
…and strangely, there can’t be perfect knowledge either because if there were perfect knowledge, neoclassical neoliberalism would know their definition of equilibrium in human systems is inaccurate,
the system’s natural tendency to maintain a stable, predictable, and familiar state of equilibrium, even if that state is dysfunctional or unhealthy
For example, at the level of family, this might be repeating patterns of alcoholism or sexual abuse through the generations.
At a macro level, arguably Neoliberalism is a socially constructed script, hidden rules and assumptions or narrative maintaining a familiar state which is dysfunctional and harmful, in fact threatening the existence of humanity.
Thank you. Keep going with deconstructing what has been socially constructed and creating second-order change.