Microeconomic Theory is based on lecture notes for a graduate course in microeconomic theory. It covers a broad range of topics, and to some extent the lecture structure is retained in the style of the book. The author provides a clear account of the main ideas in each area concisely, and in some depth of detail. The presentation is at an advanced level and provides succinct coverage of the material in a self contained discussion. Chapters are (...) organized and written independently making it possible to read any chapter without having read earlier material. Each chaper is written on the presumption that the reader has some familiarity with the topics or issues under discussion but would value further discussion, or a second point of view. While much of the material is mainstream, a substantial portion is not available in existing textbooks. The book covers a range of topics appearing in advanced courses in microeconomic theory. Coverage includes such topics as decision theory, strategic and extensive form games, auctions, bargaining, information models, principal- agent problems, signalling and screening games, cooperative games and models of learning. (shrink)

There is a very apparent conflict between economists and ethicists over the moral standards that should be applied to the managers of business firms. The view of most economists is that moral standards in business are not relevant, beyond the normal personal obligations to speak the truth and observe the law, because profit maximizing behaviour, under market and resource constraints, leads inexorably to social welfare optimization. The opposing view of most humanists is that modern markets are not competitive enough to (...) be constraining, that profit maximization often leads to social harm, and that welfare benefits are unjustly distributed. The article examines the moral constructs in microeconomic theory and the ethical objections to that theory at both the pragmatic and theoretic levels, and concludes that inappropriate assumptions about the nature and worth of human beings in the economic paradigm require the use of moral standards for business decisions and actions. (shrink)

We summarize the evidence and arguments usually employed against the use of the profit maximization assumption in microeconomic theory, and then pass directly to the methodological arguments. Two arguments are considered. The first summarizes positions which have been taken by various defenders of the "people who think a theory should be given up just because it is false are naive and confused" view. To rebut this view, we develop a scheme for classifying theoretical assumptions and show that (...) the specious plausibility of the argument in question derives from ignoring the distinctions we have drawn. The second argument attempts to show that a better theory is more likely to be attained by continuing the development of the orthodox theory. We show that this view is mistaken and then discuss steps which have been taken to develop a better theory. (shrink)

This book presents Ariel Rubinstein's lecture notes for the first part of his well-known graduate course in microeconomics.

This comment on 'Economic theories and their Dueling interpretations' questions the descriptive adequacy of the ‘sociology of economics' proposed by Gilboa, Postlewaite, Samuelson, and Schmeidler (GPSS) (2022). We ask whether economists still perceive the role of microeconomic theory as central as do GPSS. In particular, is present-day economics unified by the principles of maximising, subject to constraints and equilibrium analysis? We argue that this is not the case. GPSS’ appeal to the interpretative flexibility of economic theories appears apologetic, (...) especially the suggestion that theories and models, which once were considered positive descriptions or predictive instruments, are now cast as analytical or methodological exercises. We conclude on a more constructive note, drawing from the recent philosophical discussion of modelling which, quite paradoxically, grants highly idealized and simplified models a more important role than GPSS appear to allow. (shrink)

Essential Microeconomics is designed to help students deepen their understanding of the core theory of microeconomics. Unlike other texts, this book focuses on the most important ideas and does not attempt to be encyclopedic. Two-thirds of the textbook focuses on price theory. As well as taking a new look at standard equilibrium theory, there is extensive examination of equilibrium under uncertainty, the capital asset pricing model, and arbitrage pricing theory. Choice over time is given extensive coverage (...) and includes a basic introduction to control theory. The final third of the book, on game theory, provides a comprehensive introduction to models with asymmetric information. Topics such as auctions, signaling and mechanism design are made accessible to students who have a basic rather than a deep understanding of mathematics. Examples and diagrams are used to illustrate issues as well as formal derivations. (shrink)

Mandler argues that post WWII general equilibrium theory, with its rejection of utilitariansim and marginal productivity, does not adequately address the problems earlier neoclassicism - however flawed it may have been - was designed to solve.

This paper is part of a larger project defending of the foundations of microeconomics against recent criticisms by philosophers. Here, we undermine one source of these criticisms, arising from philosophers' disappointment with the performance of microeconomic tools, in particular game theory, when these are applied to normative decision theory. Hollis and Sugden have recently articulated such disappointment in a sophisticated way, and have argued on the basis of it that the economic conception of rationality is inadequate. We (...) argue, however, that their claim rests upon a misunderstanding of the concept of a game as it is used in microeconomics. (shrink)

This is the first full-length survey of current work which examines the compatibility of microeconomics and macroeconomics. Its particular distinction is that it makes accessible, to non-specialists, those extensive modern refinements of general equilibrium theory which are linked to macroeconomics and monetary theory. Part I traces the development and interlocking nature of two scientific research prgrams, macroeconomics and neo-Walrasian analysis. The five chapters in this part examine general equilibrium theory, Keynes' contribution, the 'neoclassical synthesis', and the Clower–Leijonhufvud (...) contributions to questions of systemic coordination. The four chapters of Part II place recent work on the micro-foundations of macroeconomics within a taxonomic scheme of Walrasian equilibrium, Walrasian disequilibrium, Edgeworthian equilibrium, and Edgeworthian disequilibrium. Part III, a single chapter, provides an overview of the subject and ventures some conclusions. (shrink)

It would be very difficult to discuss the question concerning the hypothesis of omniscience in microeconomics without relating this hypothesis to the more fundamental hypothesis of rationality (usually referred to as rationality principle or postulate) which is at the base of the very idea of an economic theory and even social sciences. Indeed omniscience is a quality which was typically attributed to homo oeconomicus whose essential characteristic is to be perfectly "rational". This association between omniscience and rationality goes back (...) to the marginalist revolution which progressively brought economists to model economic agents as rational calculators who make each decision by systematically maximizing their utility through the standard application of more or less sophisticated mathematical methods. But since the very idea of such a maximization has no meaning if all relevant parameters and variables are not carefully taken into account, it became relatively common to associate omniscience (the required knowledge of such parameters and variables) and rationality (the disposition to make decisions which tend to maximize the degree of success in reaching a goal). (shrink)

Economics without Preferences lays out a new microeconomics – a theory of choice behavior, markets, and welfare – when agents lack the preferences and marginal judgments that economics normally relies on. Agents without preferences defy the rules of the traditional model of rational choice but they can still systematically pursue their interests. The theory that results resolves several puzzles in economics. Status quo bias and other anomalies of behavioral economics shield agents from harm; they are expressions rather than (...) violations of rationality. Parts of economic orthodoxy go out the window. Agents will fail to make the fine-grained trade-offs between options ingrained in conventional economics, leading market prices to be volatile and cost-benefit analysis to break down. This book provides policy alternatives to fill this void. Governments can spur innovation, the main benefit markets can deliver, while sheltering agents from the upheavals that accompany economic change. (shrink)

My philosophical case study concerns textbook presentations of the theory of demand. Does this theory contain anything more than just a collection of tautologies? In order to determine its empirical content, it must be viewed holistically. But then, the theory implies false factual claims. We can avoid this result by embracing the theory’s normative character. The resulting consequences will be illuminated with the new autodetermination thesis recently proposed in the philosophy of physics by Oliver Timmer. Applying (...) his ideas to the theory of demand reveals that the statements of this discipline simultaneously concern both values and facts. (shrink)

This paper examines the relationship between modern theories of microeconomics and macroeconomics and, more generally, it evaluates the prospects of theoretically reducing macroeconomics to microeconomics. Many economists have shown strong interest in providing "microfoundations" for macroeconomics and much of their work is germane to the issue of theoretical reduction. Especially relevant is the work that has been done on what is called The Problem of Aggregation. On some accounts, The Problem of Aggregation just is the problem of reducing macroeconomics to (...) microeconomics. I show how to separate these problems and then try to determine to what extent particular kinds of solutions to The Problem of Aggregation succeed in reducing macroeconomics to microeconomics as well. I argue that reduction is not possible by this means given the current state of microeconomics. I also describe how reduction may be possible by means of (dis)aggregation if microeconomics is supplemented in a certain way with the results of experimental research on individual economic agents. (shrink)

Principles of Behavioral Economics, written by an acknowledged leader in the field, provides a comprehensive introduction to one of the most exciting areas of modern economics. It demonstrates how models of economic theory can be enriched by using interdisciplinary insights from psychology, sociology, evolutionary biology, and neuroscience to build the basis for a more empirically supported set of economic principles. Unique in its level of rigor and lucidity, the book highlights the important link between theoretical and empirical economics by (...) demonstrating the usefulness of a range of data sources such as observational data, lab data, survey data, and neuroeconomic data. This field-defining textbook argues that behavioral economics is not just a supplement to mainstream economics. Taking behavioral economics seriously requires a total rethink, and eventual transformation, of every area of economics. (shrink)

This first chapter treats (informally) the sins of omission and commission about property rights and contracts in neoclassical microeconomic theory. The analysis is developed at both the descriptive and normative levels, and then the Fundamental Theory of Property Theory connects the two levels. That theorem is the property theoretic counterpart of the price theoretic theorem that a competitive equilibrium, under certain assumptions, is Pareto optimal. The property theoretic version states that when the market mechanism operates with (...) no property externalities (no thefts or conversions of property) and no breaches of contracts, then the appropriation of newly created assets and liabilities by market participants (producers and consumers) satisfies the juridical principle of imputation of legal responsibility in accordance with factual responsibility. (shrink)

The allocation of healthcare resources takes place at two distinct levels. At the macroeconomic level, policymakers decide on budgets, staffing, cost‐effectiveness thresholds, clinical guidelines and insurance payments; at the microeconomic level, healthcare professionals decide on whom to treat, what the appropriate treatment is, how much time and effort should each patient receive and how urgent the need for care is. At both levels, there is a constant social need for just allocation. Policymakers are mostly guided by abstract principles of (...) justice, thinking in terms of groups of patients, epidemiological data, impersonal statistics and economic costs. On the other hand, healthcare professionals understand the need for justice at a more personal level, as they interact with patients and, in a sense, put theory into practice. Nurses hold a unique position in healthcare systems, as, traditionally, they are closer to patients than other health professionals. This means that they have a firsthand view of the effect that their decisions have on specific patients and, therefore, nurses tend to get more influenced by their personal feelings, values and beliefs at the microeconomic level. This presentation shall examine the gap between abstract macroeconomic and concrete microeconomic health resources allocation decisions, with a particular emphasis on the role of the nurse. (shrink)

What Daniel Hausman has called 'the simple criticism of economic theory' affirms that neoclassical microeconomic models include false statements, and therefore economists cannot rationally accept such models. Hausman considers, but rejects, the modal view of economic models as a defense of neoclassical theory against the simple criticism. I attempt to show that, on the contrary, the modal view can be used to defend neoclassical micro theory. The modal view distinguishes theoretical from applied economic models. Theoretical models (...) afford true descriptions of hypothetical economic agents, whereas applied models contain true or false statements about some real world situation. Relying on the modal view, I argue that the simple criticism is not well-founded, whether it concerns theoretical or applied models. (shrink)

Microeconomic theory and the theory of natural selection share salient features. This has encouraged economics to appeal to the character of evolutionary theory in defending the adequacy of microeconomics, despite its evident weaknesses as an explanatory or predictive theory. This paper explores the differences and similarities between these two theories and the phenomena they treat in order to assess the force of the economist's appeal to evolutionary theory as a model for how economic (...) class='Hi'>theory should proceed. (shrink)

Recent efforts to introduce competition, consistent with microeconomic theory, into the United States health care system raise questions of distributive justice. Similarities between microeconomic theory and libertarian philosophy suggest the possibility of confusing economic goals of efficiency and cost containment with social goals of equity of access to care. This paper raises the fear that if the two are confused, society may unwittingly abandon any serious effort to ensure that the poor have access to essential types (...) of medical care, because libertarian philosophy cannot justify placing any constraints, however beneficient, on the actual distribution of benefits and burdens of illness resulting from free trade. (shrink)

Popper's well-known demarcation criterion has often been understood to distinguish statements of empirical science according to their logical form. Implicit in this interpretation of Popper's philosophy is the belief that when the universe of discourse of the empirical scientist is infinite, empirical universal sentences are falsifiable but not verifiable, whereas the converse holds for existential sentences. A remarkable elaboration of this belief is to be found in Watkins's early work on the statements he calls “all-and-some,” such as: “For every metal (...) there is a melting point.” All-and-some statements are both universally and existentially quantified in that order. Watkins argued that AS should be regarded as both nonfalsifiable and nonverifiable, for they partake in the logical fate of both universal and existential statements. This claim is subject to the proviso that the bound variables are “uncircumscribed” ; i.e., that the universe of discourse is infinite. (shrink)

We discuss how to define “agents” and “objects” for agent-based modeling in economics (ABM) using the principles of philosophical trope theory and then propose a set of definitions for creating a framework where the tropes could be used as the objects of computation when creating models for ABM in a way that the agents can be considered as “trope processors”. We establish sets of assumptions to characterize agents and objects with tropes and we discuss the assumptions, how economic objects (...) and the values, which the agents assign to them, can be described as mereological sums of the objects’ properties and their corresponding valuations within the trope theory framework. We also discuss the benefits of the trope theory approach in general, for example, how to clarify the ontology of conceptualizing models for object-oriented programming and how the agent-based model, based on trope theory, could be constructed in practice. (shrink)

Patient autonomy, as exercised in the informed consent process, is a central concern in bioethics. The typical bioethicist's analysis of autonomy centers on decisional capacity—finding the line between autonomy and its absence. This approach leaves unexplored the structure of reasoning behind patient treatment decisions. To counter that approach, we present a microeconomic theory of patient decision-making regarding the acceptable level of medical treatment from the patient's perspective. We show that a rational patient's desired treatment level typically departs from (...) the level yielding an absence of symptoms, the level we call ideal. This microeconomic theory demonstrates why patients have good reason not to pursue treatment to the point of absence of physical symptoms. We defend our view against possible objections that it is unrealistic and that it fails to adequately consider harm a patient may suffer by curtailing treatment. Our analysis is fruitful in various ways. It shows why decisions often considered unreasonable might be fully reasonable. It offers a theoretical account of how physician misinformation may adversely affect a patient's decision. It shows how billing costs influence patient decision-making. It indicates that health care professionals' beliefs about the ‘unreasonable’ attitudes of patients might often be wrong. It provides a better understanding of patient rationality that should help to ensure fuller information as well as increased respect for patient decision-making. (shrink)

In this study, Don Ross explores the relationship of economics to other branches of behavioral science, asking, in the course of his analysis, under what interpretation economics is a sound empirical science. The book explores the relationships between economic theory and the theoretical foundations of related disciplines that are relevant to the day-to-day work of economics -- the cognitive and behavioral sciences. It asks whether the increasingly sophisticated techniques of microeconomic analysis have revealed any deep empirical regularities -- (...) whether technical improvement represents improvement in any other sense. Casting Daniel Dennett and Kenneth Binmore as its intellectual heroes, the book proposes a comprehensive model of economic theory that, Ross argues, does not supplant, but recovers the core neoclassical insights, and counters the caricaturish conception of neoclassicism so derided by advocates of behavioral or evolutionary economics. Because he approaches his topic from the viewpoint of the philosophy of science, Ross devotes one chapter to the philosophical theory and terminology on which his argument depends and another to related philosophical issues. Two chapters provide the theoretical background in economics, one covering developments in neoclassical microeconomics and the other treating behavioral and experimental economics and evolutionary game theory. The three chapters at the heart of the argument then apply theses from the philosophy of cognitive science to foundational problems for economic theory. In these chapters, economists will find a genuinely new way of thinking about the implications of cognitive science for economics, and cognitive scientists will find in economic behavior, a new testing site for the explanations of cognitive science. (shrink)

The theory of the firm did not exist, in any serious manner, until around 1970. Only then did the current theory of the firm literature begin to emerge, based largely upon the work of Ronald Coase and to a lesser degree Frank Knight. It was work by Armen Alchian, Robert Crawford, Harold Demsetz, Michael Jensen, Benjamin Klein, William Meckling and Oliver Williamson, among others, that drove the upswing in interest in the firm among mainstream economists. This accessible book (...) provides a valuable overview of the prehistory of the firm. Spanning an impressive timeline, it delves into Antiquity, the Medieval era, the pre-classical economics period and the 19th and 20th centuries. Next, the book traces the theoretical contributions from pre-classical, classical and neoclassical economics. It will be illuminating reading for students and researchers of the history of economic thought, industrial organization, microeconomic theory and business history. (shrink)

After Marx, dissenting economics almost always used 'the labour theory' as a theory of value. This paper develops a modern treatment of the alternative labour theory of property that is essentially the property theoretic application of the juridical principle of responsibility: impute legal responsibility in accordance with who was in fact responsible. To understand descriptively how assets and liabilities are appropriated in normal production, a 'fundamental myth' needs to be cleared away, and then the market mechanism of (...) appropriation can be understood. On the normative side, neoclassical theory represents marginal productivity theory as showing that (a metaphorical version of) the imputation principle is satisfied ('people get what they produce') in competitive enterprises. Since that shows the moral commitment of neoclassical economics to the imputation principle, the labour theory of property is presented here as the actual non-metaphorical application of the imputation principle to property appropriation. The property-theoretic analysis at the firm level shows how the neoclassical (and much heterodox) analysis in terms of 'distributive shares' wholly misframed the basic questions. Finally, the paper shows how the imputation principle (modernised labour theory of property) is systematically violated in the present wage labour system of renting persons. The paper can be seen as taking up the recent challenge posed by Donald Katzner for a dialogue between neoclassical and heterodox microeconomics. (shrink)

Resumen: En el presente artículo se realiza una comparación crítica de dos enfoques sobre los fundamentos de la teoría microeconómica del comportamiento del consumidor, a saber: el enfoque utilitarista y el de la preferencia revelada. Se lleva a cabo un análisis de la preferencia revelada en el contexto de la introducción de restricciones a la función de elección en la teoría de la decisión. Se evalúan sus ventajas y limitaciones en contraste con el problema de la utilidad propio del punto (...) de vista subjetivista de la teoría utilitarista. Y se confronta la capacidad explicativa de los distintos modelos de agencia racional sobre las bases de las curvas de demanda. Asimismo, se desarrolla una crítica formal al método de la preferencia revelada en entornos estratégicos de decisión.: This article makes a critical comparison of two approaches to the foundations of the microeconomic theory of consumer behavior, namely: the utilitarian approach and that of the revealed preference theory. An analysis of revealed preference is carried out in the context of introducing restrictions to the choice function in decision theory. Its advantages and limitations are evaluated in contrast to the utility problem proper to the subjectivist point of view of utilitarian theory. And the explanatory capacity of the different models of rational agency is confronted on the bases of the demand curves. Furthermore, a formal critique of the revealed preference method is developed in strategic decision-making environments. (shrink)

Scientific inquiry has led to immense explanatory and technological successes, partly as a result of the pervasiveness of scientific theories. Relativity theory, evolutionary theory, and plate tectonics were, and continue to be, wildly successful families of theories within physics, biology, and geology. Other powerful theory clusters inhabit comparatively recent disciplines such as cognitive science, climate science, molecular biology, microeconomics, and Geographic Information Science (GIS). Effective scientific theories magnify understanding, help supply legitimate explanations, and assist in formulating predictions. (...) Moving from their knowledge-producing representational functions to their interventional roles (Hacking 1983), theories are integral to building technologies used within consumer, industrial, and scientific milieus. -/- This entry explores the structure of scientific theories from the perspective of the Syntactic, Semantic, and Pragmatic Views. Each of these views answers questions such as the following in unique ways. What is the best characterization of the composition and function of scientific theory? How is theory linked with world? Which philosophical tools can and should be employed in describing and reconstructing scientific theory? Is an understanding of practice and application necessary for a comprehension of the core structure of a scientific theory? How are these three views ultimately related? (shrink)

The past twenty years have seen great theoretical and empirical advances in the field of corporate finance. Whereas once the subject addressed mainly the financing of corporations--equity, debt, and valuation--today it also embraces crucial issues of governance, liquidity, risk management, relationships between banks and corporations, and the macroeconomic impact of corporations. However, this progress has left in its wake a jumbled array of concepts and models that students are often hard put to make sense of. Here, one of the world's (...) leading economists offers a lucid, unified, and comprehensive introduction to modern corporate finance theory. Jean Tirole builds his landmark book around a single model, using an incentive or contract theory approach. Filling a major gap in the field, The Theory of Corporate Finance is an indispensable resource for graduate and advanced undergraduate students as well as researchers of corporate finance, industrial organization, political economy, development, and macroeconomics. Tirole conveys the organizing principles that structure the analysis of today's key management and public policy issues, such as the reform of corporate governance and auditing; the role of private equity, financial markets, and takeovers; the efficient determination of leverage, dividends, liquidity, and risk management; and the design of managerial incentive packages. He weaves empirical studies into the book's theoretical analysis. And he places the corporation in its broader environment, both microeconomic and macroeconomic, and examines the two-way interaction between the corporate environment and institutions. Setting a new milestone in the field, The Theory of Corporate Finance will be the authoritative text for years to come. (shrink)

An understanding of the origins of earnings distributions is of central importance for any public policy which has the aim of combating economic inequality. The aim of this book is to provide a satisfactory theoretical foundation which could serve as the rational basis for such policies. The approach, strongly influenced by human capital theory, is especially novel in that it permits individual analyses at three interconnecting levels of aggregation using the same basic microeconomic model: the level of earnings (...) distribution within age groups; the level of the overall earnings distribution across all age groups; and the distribution of lifetime earnings. The analysis demonstrates the interdependence between age composition, inequality, and public distribution policy. It also addresses the question of how differences between individuals are transformed into income differences. (shrink)

Modern microeconomic theory is based on a foundation of ordinal preference relations. Good textbooks stress that cardinal utility functions are artificial constructions of convenience, and that economics does not attribute any meaning to “utils.” However, we argue that despite this official position, in practice mainstream economists rely on techniques that assume the validity of cardinal utility. Doing so has turned mainstream economic theorizing into an exercise of reductionism of objects down to the preferences of ‘ideal type’ subjects.

Bankruptcy is conventionally understood as a financial condition: expenses exceed income, and the enterprise cannot continue. This paper argues that this definition is inadequate and misleading. Drawing on the Noura framework and the Durable Flourishing Indices (DFI), the paper proposes a teleological theory of bankruptcy: an enterprise is bankrupt if and only if it cannot, at its mature or expected operational scale, generate enough income to provide the requisites of productive participation for all participants. These requisites—derived from the broader (...) requisites of flourishing—include a sufficient income share to secure food, shelter, health, safety, and time bandwidth, as well as production-related education. (Broader education for flourishing is the responsibility of the commonwealth, not the enterprise.) The language of "income share" is chosen to distinguish the theory from both the wage labour system (in which labour is treated as a commodity) and from capital ownership (which is not required by the theory). The paper further argues that the current property system systematically produces this condition by permitting and encouraging hoarding—the withdrawal of surplus from productive circulation. A start-up that has not yet reached profitability is not bankrupt if it is on a trajectory to enable flourishing. However, an established enterprise that generates enough income but hoards it while participants lack requisites is bankrupt, regardless of its financial statements. Credit assessment must distinguish between ongoing enterprises (judged by current capacity to provide requisites) and start-ups (judged by the credibility of their plan to achieve flourishing viability at mature scale). The response to financial bankruptcy—austerity, layoffs, wage suppression, and increased burdens on remaining participants—does not address the structural problem but deepens it, destroying the cognitive space participants need to develop and sustain a meaningful life. The paper concludes that a legitimate enterprise must deploy surplus productively to sustain the conditions for productive participation for all. Financial profit is not success; enabling flourishing is. This analysis is a direct application of the DFI framework's core insight: value efficiency—how effectively societies convert resources and human time into flourishing lives—is the true measure of economic success, not monetary throughput. Building on the dissolution of the “is/ought divide” in The Natural Vow and the institutional logic of The Bancor Commonwealth, this paper extends the Noura framework to the domain of enterprise legitimacy and bankruptcy. -/- . (shrink)

This paper seeks to rehabilitate the trade theory of Augustin Cournot. In contrast to the widespread awareness among neoclassical economists of Cournot's contribution to microeconomics, there is general ignorance of his trade theory, which an earlier generation of neoclassical theorists attributed to its erroneous conclusions. I dispute this view and attempt to show the internal consistency of Cournot's trade analysis. While the assumptions underpinning his trade theory could be considered extreme, they need to be understood in the (...) light of his methodological commitments, which included a rejection of utility in the theory of wealth, and a dismissal of Say's law regarding general employment. Furthermore, I argue that the assumptions underpinning neoclassical trade theory are no less extreme, even as their theoretical conclusions are (similarly) logically consistent. All of this serves to highlight the insufficiency of theoretical rigour in establishing the relevance of a theory; the importance of history of thought in reminding us that more than one theoretical perspective exists; and, of course, the indispensability of empirical engagement in trying to arbitrate between contrasting theoretical positions. (shrink)

This highly original book develops a systematic zero-net-profit comparative statics theory of the firm that challenges many widely held views in microeconomics. It builds a bridge between the marginalist long-run theory of the firm and Sraffian theory to create a unified theoretical framework that explains how firms react to exogenous shocks resulting in new equilibrium positions of the whole economy. The central message of the book is that too often economists expect more from the microeconomic laws (...) of input demand and output supply than they can really give. The authors show that the zero-net-profit condition requires a more articulated analysis that sometimes yields qualitative results contrary to those of familiar economic laws. Written for academic researchers and graduate students, the book will be of particular interest to those working on the microeconomics of industry equilibrium, comparative statics and Sraffian economics. (shrink)

Ragnar Frisch received the first Nobel Memorial Prize in Economic Science together with Jan Tinbergen in 1969 for having played an important role in ensuring that mathematical techniques figure prominently in modern economic analysis. Frisch was also a co-founder of the Econometric Society in 1930, the inaugural editor of its journal Econometrica for over 20 years, and a major figure in Norwegian academic life. This collection of essays derived from the centennial symposium which marked Frisch's birth explores his contributions to (...) econometrics and other key fields in the discipline as well as the results of new research. Contributors include eminent scholars from Europe, the United Kingdom and North America who investigate themes in utility measurement, production theory, microeconomic policy, econometric methods, macrodynamics, and macroeconomic planning. (shrink)

The place of money capital in the theory of the firm has remained a relatively neglected question in traditions of economic analysis. In this highly integrative work, issues in production, pricing, capital investment and financial theory are brought to new levels of interdependence. Developing a three-part argument, Money Capital in the Theory of the Firm deals successively with the theoretical issues and analytic motivation, the neoclassical tradition and postclassical perspectives. In doing so, it presents a self-contained foundation (...) in the basic structures of microeconomic analysis relating to optimize decision making in the firm and in the accounting concepts and statistical apparatus of probability theory relevant to the neoclassical aspects of the argument. Additionally, the book provides the essential mathematical development of such advanced topics as utility functions defined over stochastic arguments, the equilibrium theory of financial asset prices and yields, the cost of money capital, and investment decision criteria. This book makes an important contribution to the formation of new and analytically richer perspectives in the important area of economics it addresses. It will be of particular interest to those working in economic theory and microeconomics, and their advanced students. (shrink)

At no point in recorded history has there been an absence of intense, and heated, discussion about the subject of how to conduct relations between women and men. This Handbook provides a comprehensive guide to these omnipresent issues and debates, mapping the present and future of thinking about feminist theory. The chapters gathered here present the state of the art in scholarship in the field, covering: epistemology and marginality; literary, visual and cultural representations; sexuality; macro and microeconomics of gender; (...) conflict and peace. The most important consensus in this volume is that a central organizing tenet of feminism is its willingness to examine the ways in which gender and relations between women and men have been (and are) organized. The authors bring a shared commitment to the critical appraisal of gender relations, as well as a recognition that to think 'theoretically' is not to detach concerns from lived experience but to extend the possibilities of understanding. With this focus on theory and theorizing about the world in which we live, this Handbook asks us, across all disciplines and situations, to abandon our taken-for-granted assumptions about the world and interrogate both the origin and the implications of our ideas about gender relations and feminism."--Publisher description. (shrink)

More than eighty years after the seminal work of Paul Samuelson, Revealed Preference Theory (RPT) is still a lively area in microeconomics and choice theory. The notion of ‘revealed preference’ is also much discussed in the philosophy of economics: it is at the center of methodological (on the status of behavioral evidence for choice models) and semantical (on the meaning of the preference concept) debates. The aim of this paper is to propose a clarification of the aims and (...) achievements of RPT, and more specifically of its most salient outcomes, i.e. Revealed Preference Theorems. I shall claim that the main achievement of these results is the completion of two theoretical tasks: the behavioral characterization of choice models based on preferences and related concepts, and the behavioral identification of their primitives. Consequences of this claim for the aforementioned methodological and semantics debates will be explored. (shrink)

This paper challenges Mäki's argument about commonsensibles by offering a case study from contemporary microeconomics – contemporary revealed preference theory (hereafter CRPT) – where terms like "preference," "utility," and to some extent "choice," are radical departures from the common sense meanings of these terms. Although the argument challenges the claim that economics is inhabited solely by commonsensibles, it is not inconsistent with such folk notions being common in economic theory.

Gary S. Becker (Pennsylvania, 1930) is a university professor at the Departments of Economics, Sociology, and the Graduate School of Business at the University of Chicago, Illinois. Becker earned his undergraduate degree from Princeton University and was awarded a PhD by the University of Chicago in 1955 for a thesis on the economics of discrimination, under the supervision of Milton Friedman. After teaching at Columbia University from 1957 to 1969, he returned to the University of Chicago where he has been (...) based ever since. Becker’s work and research interests encompass a wide range of topics, unified by what he calls The economic approach to human behavior (Becker 1976). He considers this refined version of the neoclassical theory of consumer behavior as a method that can be applied to analyzing individual choices beyond the boundaries of traditional economics domains, including discrimination, education (human capital), crime, addiction, the family (marriage, divorce, fertility), and altruism. Becker’s path-breaking work has been recognized with numerous honors, including the John Bates Clark Medal (1967), and the Presidential Medal of Freedom (2007). In 1992, he was awarded the Nobel Memorial Prize in Economic Sciences “for having extended the domain of microeconomic analysis to a wide range of human behavior and interaction, including nonmarket behavior” (Nobel Prize press release). Professor Becker was interviewed by Catherine Herfeld at his office on the Campus of the University of Chicago on December 8th, 2010. The discussion ranged over a number of issues including the consequences of the recent financial crisis for the economics profession, the role of mathematics in economic modeling and the role of modeling in economics, the significance of the rationality-principle, and the development of Becker’s ‘economic approach’ and its distinctiveness from behavioral economics. (shrink)

A growing body of empirical evidence suggests the existence of a Paradox of Choice, whereby a larger choice set leads to a lower expected payoff to the decisionmaker. These empirical findings contradict traditional choice-theoretic results in microeconomics and even social psychology, suggesting profound yet unexplained aspects of choice settings/behavior. The Paradox remains largely as a theoretically-rootless empirical phenomenon. We neither understand the mechanisms and conditions that generate it, nor whether the Paradox stems from choice behavior, choice setting, or both. We (...) present a general search model of consumer choice under incomplete information to examine the theoretical existence and conditions for the Paradox. The model departs from traditional microeconomic choice theory in assuming no “cognitive free lunches.” Search and evaluative efforts require time, focus, and opportunity cost in the model, as in real life. The model shows that conditions for Paradox readily exist, diminishing returns to potential value of the choice in choice set size is a necessary condition for a Paradox outcome, that a Paradox outcome can occur with or without a “choice overload” response by the decisionmaker, and that avoidance of a Paradox outcome is an impossibility in some choice settings (primitive to setting regardless of choice behavior). Lastly, we develop a pareto-improving choice set reduction algorithm that eliminates weakly dominated choice set elements and presents the restricted choice set to the decisionmaker. As such, it is shown that the algorithm acts to treat or mitigate the Paradox of Choice, as well as to pareto-improve choice-supporting evaluation more generally. Like established AI recommender systems, the novel algorithm filters choices. In the present case, the filtering is based upon identification of weakly dominated choice set elements. (shrink)

I distinguish between two styles of research that are both called . Neurocellular economics (NE) uses the modelling techniques and mathematics of economics to model relatively encapsulated functional parts of brains. This approach rests upon the fact that brains are, like markets, massively distributed information-processing networks over which executive systems can exert only limited and imperfect governance. Harrison's (2008) deepest criticisms of neuroeconomics do not apply to NE. However, the more famous style of neuroeconomics is behavioural economics in the scanner. (...) This is often motivated by complaints about conventional economics frequently heard from behavioural economists. It attempts to use neuroimaging data to justify arguments for replacing standard aspects of microeconomic theory by facts and conjectures about human psychology. Harrison's grounds for unease about neuroeconomics apply to most BES, or at least to its explicit methodology. This methodology is naively reductionist and illegitimately assumes that economics should not do what all successful science does, namely, model abstract aspects of its target phenomena instead of would-be complete and fully ecologically situated facsimiles of them. (shrink)

The concept of preference dominates economic theory today. It performs a triple duty for economists, grounding their theories of individual behavior, welfare, and rationality. Microeconomic theory assumes that individuals act so as to maximize their utility – that is, to maximize the degree to which their preferences are satisfied. Welfare economics defines individual welfare in terms of preference satisfaction or utility, and social welfare as a function of individual preferences. Finally, economists assume that the rational act is (...) the act that maximally satisfies an individual's preferences. The habit of framing problems in terms of the concept of preference is now so entrenched that economists rarely entertain alternatives. (shrink)

Pricing goods properly is critical for the further growth of electronic commerce. One price discrimination technique drawn from microeconomics theory has shown promise as regards the trading of information services. This technique, however, has a serious drawback in that it assumes that a seller knows the distribution of buyers’ preferences. Unfortunately, obtaining such data is not always easy. We can incorporate agent technologies into the technique, namely, by gathering sales data and updating information about buyers, and thus improve the (...) performance. However, such an adaptive method can end in failure if each agent becomes self-interested, namely, if the problem of collusion emerges. If collusion does occur, the rationality of any price revision is lost. To solve this problem, we have developed a pricing mechanism that can withstand buyer collusion. We provide a concrete method for calculating quality and price combinations, and then analyze the mechanism theoretically and show its effectiveness. (shrink)

This anthology highlights the theoretical foundations as well as the various applications of Behavioural Law and Economics in European legal culture. By the same token, it fosters the dialogue between European and American Law and Economics scholars. The traditional neo-classical microeconomic theory explains human behaviour by using Rational Choice. According to this model, people tend to maximize the difference between expected utility and cost ("expected utility theory"). This theory includes three assumptions: (1) unbounded rationality, (2) unbounded (...) self-interest, and (3) unbounded willpower. Behavioural Economics questions these assumptions and endeavours to render economic analysis more realistic by underpinning it with psychological insights. In recent years, the influence of Behavioural Economics on the Economic Analysis of Law has gained momentum. Behavioural Law and Economics generates a better theoretical understanding of legal phenomena and offers a multitude of applications in legislation and legal adjudication. This volume is testament to the growing and thriving Law and Economics movement in Europe. The European Law and Economics community has steadily grown and the yearly Law and Economics Conference at the law faculty of the University of Lucerne has successfully become a guiding star in the vast sky of Law and Economics. (shrink)