Sustainability Scientists’ Critique of Neoclassical Economics

Mark Diesendorf, Geoff Davies, Thomas Wiedmann, Joachim H. Spangenberg, and Steven Hail

Citation: Diesendorf M, Davies G, Wiedmann T, Spangenberg JH, and Hail S; Sustainability scientists’ critique of neoclassical economics, Global Sustainability 7, e33, 1–13 (2024). https://doi.org/10.1017/sus.2024.36

Summary: Neoclassical economics (NCE) is widely regarded as providing theoretical justification for neoliberal notions such as “governments should minimise regulation and spending, and hence leave major socioeconomic and environmental decisions to the market”.

However a large body of literature has found that NCE is largely responsible for environmental destruction and social inequality. As NCE is claimed to be a science and has appropriated basic concepts from physics, we examine critically these hypotheses and four other claims from a viewpoint of natural scientists and an ecological economist, each of whom researches sustainability. This paper defines NCE in
two ways: as a theoretical structure for economics based on (1) the hypotheses of methodological individualism, methodological instrumentalism and methodological equilibration, and (2) the three hypotheses above along with seven other common hypotheses of NCE.

We find that each hypothesis and claim fails to satisfy one or more basic requirements of scientific practice, such as empirical confirmation, underlying credible or empirical assumptions, consistency with Earth system science, and internal consistency. Sensitivity analysis is rare and ability to predict is lacking. Therefore, we recommend that neoclassical microeconomics be reformed and neoclassical macroeconomics be abandoned and replaced with a transdisciplinary field such as social ecological economics.