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In: Economics

​What role does command play in economic decision making and relationships, according to neoclassical economics?

What role does command play in economic decision making and relationships, according to neoclassical economics? What is the relationship between this position on command and the neoclassical view of contracts?

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Expert Solution

Neoclassical economics states the supply and demand to be main driving forces behind the pricing, production, and consumption of products and services. The theory coincides with the rational behaviour approach that believes in rational behaviour among the people while making economic decisions. The theory argues is against the command and argues the markets to be free. It means the command would not make rules about the businesses' behaviour, types of businesses, who may sell things, who may make things, who may buy things, quantities, prices, or types of things bought and sold.

Neoclassical economists state that there is no need for any intervention of government. The economic priorities of command should be the equilibrium in the market and growth at full employment. The command tend to focus more on decreasing the natural rate of unemployment caused due to the government policies and economic institutions instead of the cyclical unemployment caused due to the recession


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