section_path: Criticism
section_name: Criticism
paragraph_text: Criticism
  
  The philosopher Hans Albert has argued that the ceteris paribus conditions of the marginalist theory rendered the theory itself an empty tautology and completely closed to experimental testing. In essence, he argues, the supply and demand curves (theoretical functions which express the quantity of a product which would be offered or requested for a given price) are purely ontological.
  
  Piero Sraffa 's critique focused on the inconsistency (except in implausible circumstances) of partial equilibrium analysis and the rationale for the upward slope of the supply curve in a market for a produced consumption good. The notability of Sraffa's critique is also demonstrated by Paul Samuelson 's comments and engagements with it over many years, for example:
  
  Modern Post-Keynesians criticize the supply and demand model for failing to explain the prevalence of administered prices, in which retail prices are set by firms, primarily based on a mark-up over normal average unit costs, and are not responsive to changes in demand up to capacity.
  
  Some economists criticize the conventional supply and demand theory for failing to explain or anticipate asset bubbles that can arise from a positive feedback loop. Conventional supply and demand theory assumes that expectations of consumers do not change as a consequence of price changes. In scenarios such as the United States housing bubble, an initial price change of an asset can increase the expectations of investors, making the asset more lucrative and contributing to further price increases until market sentiment changes, which creates a positive feedback loop and an asset bubble. Asset bubbles cannot be understood in the conventional supply and demand framework because the conventional system assumes a price change will be self-correcting and the system will snap back to equilibrium.
  
  Paul Cockshott 's critique focuses on the unfalsifiability of the neoclassical model.In the linear examples given above we have four unknowns: the slope and intercept of both the supply curve and the demand curve.But because we only have two knowns, price and quantity, any set of supply and demand curves that crosses the point (Q, P) {\displaystyle (Q,P)} could explain the data. Hence unfalsifiability.Cockshott also points out that prices are negatively correlated with quantity due to economies of scale, not positively correlated as the theory suggests.Finally, Cockshott argues that the theory is needlessly complicated when compared to the labour theory of value, and that having to introduce a notion of the curves shifting amounts to adding epicycles.