Neoclassical economics

In the standard neoclassical economic theory, individuals are following a utilitarian ethical norm and are making decisions as if they are economically rational. 

Utilitarianism as the root for neoclassical economics has a common basis in Jeremy Bentham, Adam Smith, James Mill and John Stuart Mill (father and son) and others. They were influential philosophers and economists in the eighteenth and nineteenth century Britain [6, 7, 10]. 

As we hinted in part 2 of this chapter, there are concerns with using the traditional neoclassical economics view of homo economicus as an expresser of welfare impacts. Not all persons can or wish to translate welfare into utility into money, and not all would be willing to accept monetary compensation out of moral reasons (these respondents are usually sorted out of WTP surveys as protest answers as we described earlier in this text). 

Efficient outcomes make at least one person better off and no one worse off as the result of choice. Choices that make some better off without making others worse off are described as having gains from trade and are labeled Pareto optimal or just optimal. Neoclassical economic theory argues that, under most circumstances, a system of property rights and markets produces these efficient outcomes. But this system is efficient only if aU the effects of choices are included in market prices. If prices do not incorporate aU these effects, such situations are described as inefficient or market failures. 

Although innovation is an extremely complex activity, some simplification can be achieved for purposes of empirical study by delineating categories of innovation in the context of a model of production. Production is assumed to take place within a finite set of well-defined processes, rather than on a smooth neoclassical production function. In this respect, the model is a version of the "activity analysis" model. In contrast to the usual activity analysis model, however, some of the inputs are characterized by increasing returns to scale. Specifically, engineers often assume that capital and labor (and perhaps other inputs) may be increased at a slower rate than output, while raw materials, energy, and other inputs are increased at the same or nearly the same rate as output. The economics literature on production functions discusses these points (12.13,14). 

Lucas, M.R., 2003. Pricing decisions and the neoclassical theory of the firm. Management Accounting Research 14, 201-217. Martin, S., 1993. Advanced Industrial Economics. Blackwell. 

Se , for instance, Posner, Economic Arutysis of Law. A useful criticism of the imfrficit functionalism of this af roach is Field, "The pnddem with neoclassical instituttonal economics". 

Field, A. The problem with institutional neoclassical economics. Explorations in Economic History 18 (1981), 174-98. 

Miller, James. Game Theory at Work How to Use Game Theory to Outthink and Outmaneuver Your Competition. NewWirk McGraw-Hill, 2003. Basic work with business applications, based on a strong perspective from neoclassical economics. 

As in thermodynamics, many processes in engineering, economics, ecology, biology or agriculture rely on a closed production cycle so that e Y 0 (where non-exact differential form is marked by d). If we call the first path Y and the returning path C, the output of cyclic production leads to non-zero profit (P) which may be invested or saved (S) [336]. The concept of non-exact differential forms leads to the proper relation of so called neoclassical theory [312], i.e., Y-C=S. According to the laws of calculus [337] this solution may be... 

Those resourcing methods which are based on neoclassical economics and deal mostly with the larger economy tend to consider resource availability as a consequential result of market processes. An organizational perspective is often missing which explains both internal resourcing... 

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