Neoclassical models rely on assumptions that simplify behavior: perfect information, rational agents, smooth preferences, and markets that clear. These tools make analysis tractable, but they also create distance from real-world complexity. Critics argue that such models overlook uncertainty, power imbalances, institutional constraints, and the psychological dimensions of decision‑making.

Yet the criticism often misses the purpose of abstraction. Neoclassical theory isn’t meant to mirror reality perfectly — it provides a baseline for understanding incentives and trade‑offs. The tension between simplicity and realism is what keeps the field evolving.