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Modern economic theory has been dominated by neoclassical economics since the 1970s. Like any theory, neoclassical economics also has a series of assumptions underpinning it. These assumptions have been criticized and challenged on various grounds in the past several decades. The most serious assumption is the assumption of rational economic agents who aim to maximize their utility by analyzing the costs and benefits of every decision. The presence of "homo economicus" is very rare in our society. In fact, it is practically and psychologically impossible to be rational even most of the times. Empirical and experimental research heavily corroborates this fact. Despite such massive evidence, nearly all economic models and public policies use this distorting assumption in analysis and research. The result has been catastrophic, as can be seen in the Global Financial Crisis of 2008, the Dot-Com bust and numerous financial market crashes before that. Furthermore, the theory of rationality also reduces the effectiveness of government policies in achieving their objectives. Behavioral economics has emerged to address these fallacies of modern neoclassical economics and complement it to improve economic theory, methodologies and forecasting. Behavioral economics has mainly two branches macro theory which aims to design macro-economic models incorporating behavioral concepts and micro theory which explains the various biases that individuals, groups and institutions exhibit in economic and even social decision-making. This research is focused on micro-behavioral economic theory. While a colossal magnitude of research has been done in identifying, testing and explaining the plethora of behavioral biases, there is a dearth of research on systematically reducing these biases. This research aims to fill this gap by conducting research on private and public sector employees of 30 to 40 years age and testing for a significant difference in level of biases revealed between the two groups of employees. The research found that there is a significant level of difference in the rational decision-making behavior of the two groups of employees. It also discusses the applications of the findings and the further scope for research. [ABSTRACT FROM AUTHOR]

Contextual economics weaves together aspects of orthodox and heterodox economics theories (e.g. feminist, ecological, Keynesian and Marxist economics) in such a way that (re)interprets formal economic models within changing social, historical and environmental contexts. Drawing from the work of Julie Nelson, Kate Raworth and process philosophers, this paper conceptualises the contextual economic paradigm as nesting static abstractions within changing contexts. This brings into question the static metaphysics assumed by mainstream neoclassical economics, and presents an alternative basis for economics arising from processrelational metaphysics. This leads to an economics that: situates the economy as a subsystem of society and ecosystems; replaces Homo economicus with persons-in-communities; and redirects economic policies from profit and GDP growth to purpose and improving wellbeing. This shift in thinking, metaphysics and economics--nesting static in processes--is posited as a critical reorientation of economic decision-making for personal and planetary wellbeing. [ABSTRACT FROM AUTHOR]

Debates in economic policy Much soul-searching in the wake of the Financial Crisis was centered around the question of whether economics and economists can be trusted, respectively, as a science, and as advisors. This ongoing interest among economists, historians and philosophers of economics speaks to the observation that the crisis has renewed those debates and that economics has not yet come to rest. The general criticism that economics failed in predicting the Financial Crisis, explaining its occurrence, and enabling policy recommendations for not only remedying but also preventing such crises in the future was specifically directed at DSGE models based on New Keynesian economics (Galí, [11]; Stiglitz, [20]). Dow identifies a difficulty in this claim by relying on an unjustified distinction between value-laden and ideologically charged heterodox economics and value-free mainstream economics that Hoover seems to embrace with his dismissal. [Extracted from the article]

We propose a relational theoretical model of economic organization that offers new insight into the organizing dynamics of economic systems. Neoclassical and complexity economics are, in their Western cultural origins, based on an assumption of the primacy of the discrete individual. Collectivist economic traditions are based on the principle of collective interest rather than self-interest. We attempt a rapprochement of individualist (especially free market) and collectivist (especially centrally planned) economic cultures and traditions by modelling economic organization as arising from individual and collective dynamics and the relationships between them. Structure, process, function, and content are four fundamental inter-related properties of our model of economic organization. We posit the existence of micro, meso, macro scales of economic organization in all of structure, process, function, and contents. To operationalize our relational model, the conventional bottom-up process of self-organization is reconceived to involve relationships within micro-, meso-, and macro-economic organization. In turn, the new concept of socio-cultural organization is construed to involve relationships between and among economic organization, across micro, meso, and macro scales. Our model of relations provides a structure for complex-realist exploration, making cross-scale inter-relationships explicit and by providing a structured language for description of these relationships. [ABSTRACT FROM AUTHOR]

Precise multi-scenario projections of future economic outputs based on localised interpretations of global scenarios and major growth drivers are important for understanding long-term economic changes. However, few studies have focussed on localised interpretations, and many assume regional uniformity or use key parameters that are recursive or extrapolated by mathematical methods. This study provides a more intuitive and robust economic framework for projecting regional economic growth based on a neoclassical economic model and shared socioeconomic pathways (SSPs) scenarios. A non-uniform version of SSP2 (the middle-of-the-road scenario) was developed, and more detailed population projections for China were adopted using municipal-level data for 340 districts and parameter settings based on China's recent development. The results show that China's GDP will vary substantially across SSPs by 2050. Per capita GDP ranges from 19,300 USD under SSP3 (fragmentation) to 41,100 USD under SSP5 (conventional development). Per capita GDP under SSP1 (sustainability) is slightly higher than under SSP2, but lower on average than under SSP5. However, SSP1 is a better choice overall because environmental quality and equity are higher. Per capita GDP growth will generally be higher in relatively low-income regions by 2050, and the upper-middle-income provinces will become China's new engine for economic growth. [ABSTRACT FROM AUTHOR]

Neoclassical and behavioral economics disagree over the manner in which people make risky decisions. Neoclassical economics assumes that people make good, consistent risky decisions. Behavioral economics argues that people are inconsistent in decisions involving risks. Biology suggests that, in ancestral settings, people were under selection to behave "as if" they were maximizing, in a manner consistent with the neoclassical economic model – but maximizing a different feature. In evolutionarily novel settings such as cities, however, people will make risky decisions that are inconsistent and sometimes self-destructive. [ABSTRACT FROM AUTHOR]

Among these are the principles of circular economy (CE) and ecological economics (EE). EE views the economy as a subset of the environment and therefore considers that the economy is bounded by the natural boundaries of the planet. Due to the increasing speed of climate changes, along with unbridled economic growth and existing social disparities, research efforts have focused on approaches to develop and promote balance among resources within both ecological and economic systems. [Extracted from the article]

In chapters on private finance, education, pensions and housing, Offer illustrates attempts by successive governments to delegate responsibility to markets. Offer, however, presents a different argument, based on the distinctive time horizons of markets and governments. Avoiding romanticism about the state, Offer confronts the growing corruption in politics, the normalisation of private interests in political careers. [Extracted from the article]

Despite the fact that psychoanalytical concepts are absent in Yahya M. Madra's Late Neoclassical Economics, the three commentaries on the book, by Chakrabarti, Glynos, and Primrose, read the text in a certain psychoanalytical key, and for good reason. Their readings demonstrate that a number of unnamed psychoanalytical models silently informed the discourse analysis mobilized throughout the text. Reading late neoclassical economics as an internally differentiated field of defense formations against contradictions, antagonisms, and conflicts that arise from the constitutive destructuredness of the economy, this response essay by Yahya M. Madra explores the applicability of the key psychoanalytical concepts of negation (repression, foreclosure, disavowal) for a discourse analysis of economic models. [ABSTRACT FROM AUTHOR]

Prior studies have largely debated and demonstrated the positive effect of economic liberalization on economic growth, but they have not clarified how and to which extent economic liberalization affects corporate investment, the main driver of a country's economic growth. This paper investigates the relationship between economic liberalization and corporate investment by modelling the microeconomic channels through which economic liberalization affects corporate investment. Our theoretical framework extends the standard neoclassical model of firm value maximization to incorporate the effect of economic liberalization on corporate investment via several microeconomic channels. We test the theoretical predictions of our model by using a large and heterogeneous sample of non-financial US firms for the period 2000–2019. The empirical results support our hypotheses that economic liberalization positively affects corporate investment both directly and indirectly through different channels. These effects hold, although with different intensity, for all dimensions of economic liberalization. • We investigate the relationship between economic liberalization and economic growth by modelling the microeconomics channels through which economic liberalization affects corporate investment and hence economic growth. • The theoretical predictions of the model are tested on a large and heterogeneous sample of non-financial U.S and Canadian firms over the period 2000–2019. • Empirical results suggest that economic liberalization positively affects economic growth by enhancing corporate investment via different channels or effects. • These different effects hold, although with different intensity, for many constituent components of economic liberalization/freedom. [ABSTRACT FROM AUTHOR]

Roemer is here making three claims, namely: that exploitation, as defined in the previous paragraph, is unjust if and only if it issues from distributive injustice - "robbery of one form or another"; that if capitalism is to count as unjustly exploitative, then it must come about through such injustice; and that Marx affirms (ii), which is explained by his being "sensitive to" (i), for he wants to condemn capitalism as unjustly exploitative. Capitalism solves the problem of labor "difficulty" - the allocation of labor inputs across economic units with different capital intensities - by expressing the value of the exercise of labor capacity in terms of the value of its product. This will not vindicate Roemer's or Marx's theory, but it will show that Roemer's critique of Marx is wide of the mark. VI.B Roemer Roemer does not affirm Marx's distinction between capital's mode of exploitation and its mode of production. 55 Roemer's inference is effectively criticized in Cohen, I Self-Ownership i , chap. 8. 56 In Note 11, I discussed Roemer's example of an egalitarian, private ownership economy with wage labor but no exploitation. [Extracted from the article]

Research Summary : How do new entrants create and capture value in established industries? Starting from the foundations of neoclassical economics, we model entrepreneurial entry and competition as occurring simultaneously in production technology space and product attribute space. Our model's central feature is to disaggregate entrepreneurial rents into four components: arbitrage, innovation, organization, and uncertainty‐bearing. This permits us to model the nature of value creation from a common analytical platform, and to measure value capture as a set of distinct rent streams available to multiple stakeholders over time. Managerial Summary : Although there is broad consensus that the essence of entrepreneurship is the creation and capture of new value, both scholars and practitioners have struggled to connect this basic exhortation to the entrepreneurial process. This paper argues that returns to entrepreneurial action can be generated through four main mechanisms: innovation, uncertainty‐bearing, new business models, or inter‐industry arbitrage—either uniquely, or in combination. Examining these mechanisms for value creation together reveals implications for how best to organize and manage the entrepreneurial process so that that returns to entrepreneurial action can be appropriated equitably. [ABSTRACT FROM AUTHOR]

This chapter conducts a systematic comparison of behavioral economics's challenges to the standard accounts of economic behaviors within three dimensions: under risk, over time, and regarding other people. A new perspective on two underlying methodological issues, i.e., inter-disciplinarity and the positive/normative distinction, is proposed by following the entanglement thesis of Hilary Putnam, Vivian Walsh, and Amartya Sen. This thesis holds that facts, values, and conventions have inter-dependent meanings in science which can be understood by scrutinizing formal and ordinary language uses. The goal is to provide a broad and self-contained picture of how behavioral economics is changing the mainstream of economics. [ABSTRACT FROM AUTHOR]

This article compares the statistics generated by two different income-expenditure models for short-run analyses, a Keynesian model and a neoclassical model which assumes a perfectly competitive market. The two models assume the economy consists of households, business firms, and the government. The author further discusses the qualities inherent in these sectors including supply labor, portfolio management, consumption, capital goods, the issuance and purchase of bonds, and the relation between ex-ante saving and investment.

This survey article provides a critical overview of the development of the neoclassical theory of induced technical change. From Hicks's introduction of the concept in his Theory of Wages up to the recent literature the strengths and weaknesses of the proposed models and the contexts in which they have been developed are outlined. It is shown that induced technical change has been invoked to explain various long-run distribution conundrums which could not be explained with standard neoclassical growth theory. The importance of induced technical change for the long-run distribution of income cannot be doubted. Nevertheless, we show that neoclassical models of induced technical change are still unsatisfactory in a number of respects. [ABSTRACT FROM AUTHOR]

Purpose The evolution of International Financial Reporting Standards (IFRS) was nurtured by economists and accountants loyal to the philosophical basis of what is often referred to as “Western” market economies, being classical and neoclassical contracting theories. The purpose of this paper is to illustrate how a particular Asian cultural attribute (guānxì ) impacts on the efficacy of fair value measurement.Design/methodology/approach Using a literature review and research of studies of the adoption of IFRS in China, studies of both guānxì and fair value in Chinese accounting research, this study unbundles Williamson’s governance structure and contracting theory to examine how guānxì is positioned orthogonally to fair value (market-oriented valuation) principles for financial reporting. This is followed by a case study of the events surrounding the collapse of China Medical Technologies.Findings Guānxì is integral to Asian economies and economic transactions. Resulting conditions, characterised by relational contracting, may not meet the qualitative characteristics of neutrality and faithful representation in fair value measurement of assets and liabilities. The same may be true when insider or “trusted party transaction” values prevail for large ticket transactions among entities in any jurisdiction.Research limitations/implications Future research on the impact of guānxì may be constrained by its often hidden, and yet dynamic, character; and the varieties of its manifestations.Originality/value This study highlights how difficult it may be to achieve both comparability and relevance in the asset and liability recognition and measurement rules in Asian (and possibly also other) economies adopting accounting principles that are developed in a Western context. [ABSTRACT FROM AUTHOR]

The neoclassical economic model predicts that price controls lead to deadweight losses. In experimental auction markets, actual deadweight loss is greater than what the neoclassical model predicts, because access on the buyer side under price controls is more random in practice than what the neoclassical model predicts. The randomness that accounts for losses being larger than predicted further implies not only that price controls are no general cure for unfair access but that price controls can be a source of such unfairness. [ABSTRACT FROM AUTHOR]

As the title of this essay suggests, my concern is with the issue of what are economic models. However, the goal of the paper is not to offer an in-depth study on multiple approaches to modelling in economics, but rather to overcome the dichotomical divide between conceptualizing models as isolations and constructions. This is done by introducing the idea of economic models as believable worlds, precisely descriptions of mechanisms that refer to the essentials of the modelled targets. In doing so I make use of the Woodward's (2002) conceptualization of mechanisms. It is shown that such models do not offer the perfectly true descriptions of the actual world but justified beliefs about the modelled world, precisely they aim at maximizing truth and minimizing falsity in a large body of belief about the real world. The analysis throughout the paper is supported by in-depth examination of the Varian's (1980) model of sales that is here treated as a representative way of reasoning in neoclassical economics. [ABSTRACT FROM AUTHOR]

The ISLM model, introduced in 1936-37 to provide interpretations of Keynes's General Theory, subsequently emerged in its Hicks-Hansen form as the workhorse and 'trained intuition' of post-war macroeconomists. However, ISLM is an essentially orthodox model based on neoclassical foundations and fails completely as an adequate representation of central elements of Keynes's macroeconomic thought. This article proposes IYLM as a replacement for ISLM, the new model being General Theory-compatible in that it is grounded only on key propositions in that work. Its purpose is to contribute, within the constraints of a two-market framework, to the resuscitation of Keynes's macroeconomics as an alternative to the inadequacies of much current macroeconomics. The first part of the article derives the model and argues that those sympathetic to The General Theory can accept the IYLM framework whilst simultaneously rejecting ISLM. The second part shows that Hicks- Hansen ISLM is based on an income-augmented form of orthodox loanable funds theory. [ABSTRACT FROM AUTHOR]

Modern day antitrust policy is grounded firmly in neoclassical economics. It is important, however, to test whether the modelling assumptions accord with the facts. It is also important to assess whether behavior that deviates from the conventional assumptions is systematic and persistent. If the relevant facts suggest that consumers or firms might behave in ways that depart from conventional assumptions, then private parties, government agencies and the courts should consider alternate economic models that account appropriately for the observed behavior. [ABSTRACT FROM AUTHOR]

This comment shows that Walras, the central figure among the Neoclassical school founders, describes a comprehensive theory of production, capital and money; hence, Nicholas's main claims that "the Neoclassical approach has a fundamentally flawed view of the determination of commodity prices because it conceives of them as being formed in the first instance in the process of exchange abstracting, in the sense of ignoring, production and money" are not based on Walras's theory, and they are unfounded and incorrect. Nicholas accepts the erroneous method of post-Walras authors, namely, when they discuss Walras's approach, the economy is presented either through the exchange economy or through the production economy; moreover, these representations differ from his original model and are incomplete. The result is that these two different theories, post-Walras authors' theory and Walras's original theory, have been identified with each other; and these terms are used interchangeably as if they are not any different from each other. [ABSTRACT FROM AUTHOR]

The purpose of this article is to analyze the relationship between the discipline of Behavioural Economics and the Neoclassical School. On the basis of the available literature, the paper aims to investigate if the two branches are totally opposite, or if the behavioural theories only extend and complement the mainstream economics. [ABSTRACT FROM AUTHOR]

Endogenous growth models are built around the concept of a knowledge stock. This knowledge stock can also be interpreted as a localized stock that operates at the regional level, as is common in the regional innovation systems literature. We use data from the second, third and fourth Community Innovation Surveys (covering 1994–1996, 1998–2000 and 2002–2004) to measure the build-up of knowledge at a very low regional aggregation level (“across streets and hallways”) in the Netherlands. In doing so, we account for regional agglomeration effects. We find that such local knowledge stocks have a small influence on innovation and are far outweighed by firm-specific characteristics. [ABSTRACT FROM PUBLISHER]

This paper presents a critical review of the neoclassical pricing models and assumptions used to valuate the products of structured finance using historical market data provided by credit default swaps. These models are founded on the idea that the efficient market hypothesis could be justification to use various credit derivatives to price-related assets. This market-based approach to pricing greatly simplified the complex nature of structured finance. However, it also created new risks that were not apparent to the market and subsequently grew unattended. These risks are identified and their connection to the real economy is explored in Keynesian, Davidsonian, and Minskian terms. It is the conclusion of this paper that a significant contributor to the credit crisis was market participants' reliance on the efficient market theory and lack of awareness of Keynes's key insights into uncertainty. [ABSTRACT FROM AUTHOR]

We present a neoclassical economic model of the human right to water using a nonrenewable resource model inclusive of a backstop technology. The right is interpreted as a minimum consumption requirement the government is obligated to fulfill in the event that any one household cannot do so independently. Differing by income levels, households maximize utility by purchasing a composite consumption good and water from two distinct, government-owned sources. Facing physical and financial constraints, the government uses fiscal policy to address potential human rights violations. Reducing the analysis to two periods, we develop a novel approach to compare total welfare levels from a joint human rights and neoclassical economics perspective. We define a human rights welfare standard and discuss cases in which traditional social welfare measures would exceed, violate, or meet this standard. We thus offer a unique way to merge economic analysis with human rights research. [ABSTRACT FROM AUTHOR]

This article re-examines the prevalent view that classical/neoclassical economics contains only bases or ingredients of rational choice theory, i.e., the economic model of human action and society. Instead, it proposes that elements or implications of alternative ‘irrational choice theory’ also coexist with those of ‘rational choice’ and are relatively important in much of classical and neoclassical economics. The article identifies and considers certain elements and implications of irrational choice theory in classical and neoclassical economics. These consist of the reality, possibility, and realm –i.e., conception and observation – of irrational choices in the economy. The article contributes to understanding better how traditional economics relates to contemporary economic-sociological rational choice theory and its alternative. [ABSTRACT FROM PUBLISHER]

Using a disaggregated Marshallian macroeconomic model, this paper investigates how the adoption of a set of “free market reforms” may affect the economic growth rate of South Africa. Our findings suggest that the institution of the proposed policy reforms would yield substantial growth in aggregate annual real GDP. The resulting annual GDP growth rate could range from 5.3% to 9.8%, depending on which variant of the reform policies was implemented. [ABSTRACT FROM PUBLISHER]

Abstract: “Marshall''s problem” consists in finding a way to integrate physics and biology into economics in order to represent a complex economic world. It is widely believed that Alfred Marshall was the first to address the issue, but he failed to integrate the two methodological approaches into economics. In particular the prevailing view is that Marshall was unable to follow through on his declaration that biology is the “Mecca” of economics. This paper reconsiders “Marshall''s problem” by focusing on the intellectual connections among Darwin, Babbage and Marshall: it explores the relationship between Marshall''s view of complexity as a dialectical mixing of routine and variation and reconstructs the development of a powerful intellectual model that we call the “evolutionary machine”. [Copyright &y& Elsevier]

This paper argues that classical-Marxian models of economic growth are similar to neoclassical models in neglecting the role of aggregate demand, either by omitting aggregate demand issues altogether or by relegating the role of aggregate demand to the short run. By reviewing the writings of classical-Marxian authors and by examining recent contributions to the classical-Marxian literature, it discusses the implicit assumptions that allow these theories to neglect the role of aggregate demand by examining alternative growth theories in which aggregate demand has a major role to play. It also assesses to what extent classical-Marxian economists are justified in neglecting aggregate demand as a determinant of long-run growth. [ABSTRACT FROM AUTHOR]

This article investigates the proposition that situation is the determinant of selection and valuation. It investigates the ways in which various types of situation dictate selections and valuations and contrasts this process with the marginal model of economic theory. Rational and behavioural approaches to theory are compared. It is suggested that situation-related selection provides a more realistic account of consumer selection than neoclassical theory. The ‘situations’ that govern choice are seen as established through a process of ‘support-bargaining’, whereby individuals adjust their behaviour and opinions to gain the support of those around them. This process forms also the abstract ‘situations’ embodied in theories about the nature of the world and society. The individualism of neoclassical theory is displaced in the process of support-bargaining. The idea of support-bargaining focuses attention on the dependence of neoclassical theory on support to offset its fundamental faults. It is suggested that it be replaced with the theory of support-bargaining and associated situation-related selection. [ABSTRACT FROM AUTHOR]

The article presents a study which focused on the feasibility of empirically evaluating the internal dynamics of the Marshallian industrial district. The researchers used a model which is based on a structure-conduct-performance framework with multiple feedbacks. They also estimated the three equations that consist the model with the use of data from a sample of 45 districts found in the region of Castilla-La-Mancha, Spain from 1999 to 2004.

The magnitude and the direction of net international capital flows do not fit neoclassical models. The fifty U.S. states comprise an integrated capital market with very low barriers to capital flows, which makes them an ideal testing ground for neoclassical models. We develop a simple frictionless open economy model with perfectly diversified ownership of capital and find that capital flows among the states are consistent with the model. Therefore, the small size and "wrong" direction of net international capital flows are likely due to frictions associated with national borders, not to inherent flaws in the neoclassical model. [ABSTRACT FROM AUTHOR]

This paper gives an outline of evolution of the concept and econometrics of production function, which was one of the central apparatus of neoclassical economics. It shows how the famous Cobb-Douglas production function was indeed invented by von Thünen and Wicksell, how the Constant Elasticity of Substitution (CES) production function was formulated, how the elasticity of substitution was made a variable and finally how Sato's function incorporated biased technical changes. It covers almost all specifications proposed during 1950 to 1975, as well as the linear-exponential (LINEX) production functions and incorporation of energy as an input. The paper is divided into single product functions, joint product functions, and aggregate production functions. It also discusses the 'capital controversy' and its impacts. [ABSTRACT FROM AUTHOR]

Although industrialization first occurred in England, it is thought that China, not England, may have been the world leader in technology at the time. Yet, China did not industrialize until 150 yr after England and nearly a century after less advanced European countries. This represents a puzzle because two-sector neoclassical growth models, such as Hansen and Prescott (2002) , that accurately match industrialization, require that more technologically advanced countries industrialize at an earlier date. I find that a model that accounts for cross-country heterogeneities in population density accurately predicts the timing of industrialization in China. ( JEL F43, N10, N30, O11, O14, O41) [ABSTRACT FROM AUTHOR]

The article focuses on the impact of Frank Ramsey's 1928 article "A Mathematical Theory of Saving" on the economics profession of the 1960s. The article discusses reactions of economists to Ramsey's economic growth model and infers that Ramsey's use of advanced mathematics led to his portrayal as ahead of his time. The author tracks references to Ramsey in economics and finance journals in JSTOR (Journal Storage), specifically references to Ramsey's discussions of economic growth, taxation, and subjective probability and expected utility.

The article focuses on the relationship between economic growth theory and developmental economics, particularly after economist Robert Solow's work on growth theory in 1956 and 1957 and in the formal analysis of economic development. The article examines the Solow growth model and how it applies to developing countries such as tropical countries. It is argued that the geographic scope of the Solow growth model was intended to include underdeveloped countries as well as developed countries. The article also discusses capital accumulation, economic models, and endogenous growth theory.

We analyze a generalized neoclassical growth model that combines a normalized CES production function and possible asymmetries of savings out of factor incomes. This generalized model helps to shed new light on a recent debate concerning the impact of factor substitution and income distribution on economic growth. We show that this impact relies on both an efficiency and a distribution effect, where the latter is caused by the distributional consequences of an increase in the elasticity of substitution. While the efficiency effect is always positive, the sign of the distribution effect depends on the particular savings hypothesis. If the savings rate out of capital income is substantial so that a certain threshold value is surpassed, the efficiency effect dominates and higher factor substitution accelerates the accumulation of capital and works as a major engine of growth. [ABSTRACT FROM AUTHOR]

This paper studies industry-level dynamics and demonstrates the ability of a modified neoclassical growth model to capture a range of empirical facts. The paper begins by using U.S. data to document skilled and unskilled labor trends within industry sector classifications as well as industry sector output trends. Using Current Population Survey data from 1968 to 2004, it is shown that the ratio of skilled workers to unskilled workers employed has risen in all industries. The absolute increase in this ratio was larger in the more skilled industries, while the growth rate was larger in the less skilled industries. Furthermore, using national income account data, it is shown that relatively high-skilled industries have accounted for an increasing share of output over time. A version of the neoclassical growth model is then constructed to match these observations. One important feature of this model is a structure that introduces new goods into the economy at each moment of time. The model is able to capture a rich set of labor market movements between sectors and between skill levels as well as changes in the relative output shares across industries, yet preserves many nice features of the neoclassical growth model.( JEL E13, J20, 030) [ABSTRACT FROM AUTHOR]

We study the effects of inflation for a small open economy when the representative agent has Marshallian preferences, with which the rate of time preference is a decreasing function of savings. An increase in the inflation rate reduces the permanent income of the representative agent, which, with Marshallian preferences, also reduces the rate of time preference. Hence, savings falls and the country runs a current account deficit. The numerical evaluations of the model suggest that inflation has significant effects on welfare in the steady state. [ABSTRACT FROM AUTHOR]

This response is a defense of neoclassical economics. Neoclassical economics contains more than the perfectly competitive model: much of it concerns the problems of market failure including public goods, externalities, imperfect structure, and asymmetric information. The article acknowledges that economic models are abstract, but argues that abstraction can be useful, and that full-blown utility theory is not required to gain insights from the concepts. Neoclassical economics helps us understand how the world works. [ABSTRACT FROM AUTHOR]

Reviewing a recent collection of readings on the controversy between post-Keynesians and neoclassicals on the foundations of political economy, this essay attempts to assess the debate and comments on the controversial question of reswitching. [ABSTRACT FROM AUTHOR]

We study an overlapping generation model of Diamond's type. In contrast to Diamond, we do not assume that the technology can be represented by an aggregate neoclassical production function. Rather, we study the case in which (i) the technology consists of a finite number of constant coefficient productive activities, (ii) there are capital goods physically heterogeneous with respect to each other and to the economy's only consumption good and (iii) there are two alternative production methods for obtaining the consumption good. We explore the possible linkage between reswitching of techniques and the multiplicity of stationary state equilibria of the model. [ABSTRACT FROM AUTHOR]

In the neoclassical growth theory, higher saving rate gives rise to higher output per capita. However, in the Keynesian model, higher saving rate causes lower consumption, which may lead to a recession. Students may ask, "Should we save or should we consume?" In most of the macroeconomics textbooks, economic growth and Keynesian economics are in separate, sometimes unsequential, chapters. The connection between the short run and the long run is not apparent. The author builds a bridge between the neoclassical growth theory and the Keynesian model. He links the Solow diagram and the IS-LM curves and depicts the short-run to long-run transition of the economy after changes in saving and other macroeconomic policies. [ABSTRACT FROM AUTHOR]

The article highlights the significance of Michael Woodford's contributions to the study of monetary economics, especially through his book "Interest and Prices: Foundations of a Theory of Monetary Policy." Woodford's intention is to make the book a starting point for the future creation of quantitatively satisfactory models of the monetary transmission mechanism for specific countries. The book may be viewed as the culmination of attempts to establish a neoclassical synthesis that combines new classical and Real Business Cycle literature with Keynesian literature.

The article explores a synthesis between neoclassical economic theory and critical theory. The author views that the neoclassical paradigm is not inconsistent with the progressive anti-subordination and community building goals of critical theory. It presents neoclassical theory as an example of rigorous empirically based scholarship and suggests that critical theory could benefit from making similarly rigorous models.

This paper provides evidence of a problem with the influential testing and assessment of Solow's (1956) growth model proposed by Mankiw et al. (1992). It is shown that when the assumption of a common rate of technical progress is relaxed in the neoclassical model, the goodness of fit of Mankiw et al.’s equation improves dramatically. However, and more importantly, it is shown that this result, as well as the magnitude of estimates obtained, merely reflects a statistical artifact. This has serious implications for the possibility of actually testing Solow's growth model. [ABSTRACT FROM AUTHOR]

In this progress report, we first indicate the origins and early development of the Marshallian Macroeconomic Model and briefly review some of our past empirical forecasting experiments with the model. Then we present recently developed one-sector, two-sector and n-sector models of an economy that can be employed to explain past experience, predict future outcomes, and analyze policy problems. The results of simulation experiments with various versions of the model are provided to illustrate some of its dynamic properties that include chaotic features. Last, we present comments on planned future work with the model. [ABSTRACT FROM AUTHOR]

Tony Lawson has argued that the methodology of neoclassical economics is deductivist: in constructing their formal models, economists hope to be able to provide explanations based on laws, as described by the deductive-nomological model of explanation. This article argues in contrast that neoclassical economics cannot be understood as following just one methodology. It is argued that neoclassicism exhibits two methodologies, one "official" and one tacit. The former is empiricist, and corresponds to the practice that has been described by Lawson. The latter, which can be called "hypothetico-deductive rationalism", amounts to the position that knowledge of the world can be obtained without any empirical verification of one's assumptions, simply by exploring the implications of the assumptions one makes. [ABSTRACT FROM AUTHOR]