1. The opportunity costs of neoclassical economics.
- Author
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Jennings Jr., Frederic B.
- Subjects
- *
NEOCLASSICAL school of economics , *COST , *OPPORTUNITY costs , *ECONOMIES of scale , *VALUE (Economics) - Abstract
The notion of 'opportunity cost' has been neglected in economics. The reason is that any such measure of cost is invisible, unobservable, and untestable. Yet the so-called 'competitive ideal' in neoclassical theory is based on claims of decreasing returns and substitutional tradeoffs in production, consumption, and social relations, and therewith an exclusive focus on scarcity in economics. Within this view, collusion is suspect: it raises prices, reduces sales, and so harms social welfare. This is the baseline emphasis of neoclassical microeconomic theory. The opportunity costs of this framework involve a significant loss of perspective on actual economic phenomena, the potential value of which may far exceed that of orthodoxy. The unbounded character of economic effects suggests an analytical bound derived from our rational limits, since we cannot see the full range of outcomes stemming from our decisions: planning horizons so enter this scene. The paper describes the horizonal theory that would have emerged from the 1930s debates on cost had Hicks not walked away from increasing returns and had Hirshleifer not promoted a false 'rescue' endorsed by Alchian in 1968, declaring decreasing returns 'a general and universally valid law.' [ABSTRACT FROM AUTHOR]
- Published
- 2022