Perfect Markets

Most of neoclassical economics (and current economic theory) is based on the assumption that markets are perfect in the following ways: all parties know and share the same information, rational decision-making on the parts of buyers and sellers, low or no transaction costs, perfect competition, no monopolies, and equal access. In reality, none of the conditions are usually present, creating a situation where current economic theories of market dynamics don’t really work in practice as they do in theory. Government and other social interventions often try to compensate for markets not actually being perfect but current theory doesn’t yet adequately explain the dynamics of real markets.