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    markvanmark's Avatar
    markvanmark Posts: 1, Reputation: 1
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    #1

    Feb 22, 2007, 05:59 AM
    Problems with profit maximization
    What are the main criticisms of the classical profit maximization theory?
    CliffARobinson's Avatar
    CliffARobinson Posts: 1,416, Reputation: 101
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    #2

    Mar 16, 2012, 02:30 PM
    Neoclassical economics is sometimes criticized for having a normative bias. In this view, it does not focus on explaining actual economies but instead on describing a "utopia" in which Pareto optimality applies. In the opinion of some developers of an alternative approach, the purpose of neoclassical economics is "to demonstrate the social optimality if the real world were to resemble the model", not "to explain the real world as observed empirically". [ 1 ]
    Large corporations might perhaps come closer to the neoclassical ideal of profit maximization, but this is not necessarily viewed as desirable if this comes at the expense of neglect of wider social issues. The response to this is that neoclassical economics is descriptive and not normative. It addresses such problems with concepts of private versus social utility. [ 2 ]
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