Neoclassical Equilibrium Theory Research Articles

Is farmland financial innovation narrowing the urban-rural income gap? A cross-regional study of China.

Over the past four decades, China's economy has experienced tremendous economic growth but also a widening urban-rural income gap. Given the dilemma of the urban-rural income gap in China explained by neoclassical equilibrium theory, this paper attempts to provide a new theoretical explanation for the large-income gap between urban and rural areas in China. We select data from 30 provinces(cities) in China over the period from 2006 to 2017 as a sample to investigate whether and how the degree of farmland financial innovation narrows the urban-rural income gap. The results show that the coefficient for farmland financial innovation is significantly negative at the 1% level, signifying that financial innovation can narrow the urban-rural income gap in China. The mediation effect test provides evidence that farmland financial innovation narrows the urban-rural income gap by promoting the permanent migration of the labor force and upgrading the industrial structure. Our results indicate that the government should promote various forms of farmland financial innovation, establish rural property rights transaction system and free farmers from deep farmer-land attachment to realize permanent labor migration.

Wider economic impacts of transport infrastructure investments: Relevant or negligible?

Wider economic impacts (WEI) comprise all effects that are not assessed appropriately in conventional cost-benefit analysis (CBA). These effects are generated by market imperfections, in the view of neo-classical equilibrium theory. In real economies such imperfections are not exemptions but frequent phenomena, e.g. stemming from increasing returns to scale or scope, or structural changes of products and industrial processes. Although the existence of WEI is not in question, they are usually not considered in practical assessments of transport infrastructure investments because they can only be estimated with high uncertainty and – in industrialised countries in particular – they are assumed to be of negligible magnitude. This paper presents approaches to WEI measurement based on GDP and on welfare, analyses the feasibility for combining WEI with conventional CBA, and discusses issues related to decision-making in situations where consideration of WEI appears to be relevant.

O desenvolvimento do socialismo de mercado

The paper describes and analyses the debate among neoclassical economists that took place in the third decade of 20th. century regarding the possibility of central planning. We trace the development of the “market socialism” models – attempts to use neoclassical equilibrium theory to create allocative mechanisms that could simulate actual markets. We defend the methodological thesis that such attempts failed because its supporters disregarded asymmetries between explanation and prediction existing in economic theory: in every step in the development of market socialism, elements of actual markets that were neglected in theoretic simplifications prevented the model to work properly, inviting further modifications that reintroduced market elements.

The Crisis in Russia: Sources and Lessons

The article criticizes neoclassical equilibrium theory which is, to the authors opinion, unable to explain crisis phenomena in the modern economy. The author also criticizes the policy of the Russian government and suggests using Keynesian ideas as a theoretical ground for economic policy as well as switching the attention from monetary issues to the problems of the real sector of economy.

Capital Subsidies Versus Labour Subsidies: A Trade-Off Between Capital and Employment?

This paper examines the consequences of capital and labour subsidies for employment, capital formation and other macroeconomic variables within an OLG small open economy model of wealth accumulation. Two cases, the neoclassical-equilibrium one and the modern-equilibrium one, have been analysed. We discover that the employment effects of the subsidies studied differ significantly, while whether the subsidy hike is financed by an increase of payroll taxation or a decrease of employment subsidisation is immaterial for the qualitative effects on the macroeconomic system. In the neoclassical-equilibrium theory, a capital subsidy causes a temporary increase in hours worked which vanishes in the new long run, while an increase in labour subsidy has no aggregate effects on the macroeconomic equilibrium. The key finding of the modern-equilibrium case is the existence of a negative relationship between capital formation and employment. Capital subsidies boost investment and aggravate unemployment, while labour subsidies stimulate employment and may depress capital accumulation. unemployment, wealth accumulation

Empirical measurement of credit rationing in agriculture: a methodological survey

AbstractEmpirical analysis of rural credit market failure has been of key scientific and political interest in recent years. The aim of this article is to give an overview of the various methods for measuring credit rationing that are employed in the literature. Furthermore, the methods are subjected to a comparative evaluation of their specific strengths or shortcomings. Six approaches are distinguished: measurement of loan transaction costs, analysis of qualitative information collected in interviews, analysis of quantitative information collected in interviews using the credit limit concept, analysis of spill‐over effects with regard to secondary credit sources, econometric household modeling, and the econometric analysis of dynamic investment decisions. An explicit comparison with a first‐best solution is impossible in the first three approaches, since they essentially rely on a subjective assessment of borrowers' access to credit, based on qualitative or quantitative indicators. The fifth and sixth approaches allow a rigorous interpretation in the framework of neoclassical equilibrium theory. The fourth approach takes an intermediate position, since spill‐over on segmented loan markets reveals a willingness to pay with regard to the supposedly less expensive but rationed primary source. The approaches are fairly data demanding in general, usually requiring specific data on loan transactions. Even so, most approaches are applicable to cross‐sectional household data. With the exception of the first, all methods surveyed might plausibly be used to empirically detect credit rationing.

Industry application of behavioral science

One of the more significant errors in the history of science occurred during the "marginal revolution" in economics near the end of the nineteenth century. Rather than explicitly recognize in basic theory that the happiness we seek to maximize in life originates within oneself, the early theorists formulated their equations as though human satisfaction resided in external things-as in so much utility (economist's term for satisfaction) per pound of sugar. Over the past 125 years, economists have developed mainstream mathematical economics on this incorrect basis resulting in the ill-founded neoclassical Equilibrium Theory. Because of this error economic theory is fundamentally timeless. The present theory, in its canonical form, corrects the early marginalist's error by identifying utility (time-integrated pleasure) exclusively with the stream-of-consciousness attending (expected) mental and physical activity. Time is now explicit in basic theory, thereby allowing, for the first time, the substantive computer-modeling of time-dependent, small- and large-scale economic systems. Furthermore, this new approach is methodologically compatible with mainstream sociology and institutional economics, allowing increased interdisciplinary cooperation that may influence policy and thereby affect industry and markets. And safety engineering stands to benefit from the accommodation of neuropsychology in understanding human error in the supervision and control of technology.

Is A Worldly Philosophy Still Possible?: Adolph Lowe As Analyst And Visionary

I This is not an age of economic scenarios. The social dramas of Smith, Ricardo, Marx, Mill, and Schumpeter already have an antiquated air. One reason for this is surely the increasing formalization of economics, an approach that does not so much rule out the consideration of large-scale configurational change as avoid it because it lends itself poorly to the procedures of formal analysis. A second reason is perhaps more fundamental. It is that the path of the economy is no longer established solely by the spontaneous actions of its players. Government is now inextricably entwined in the outcome of the economic process, introducing a crucial element of political determination into the course of economic life. Thus, autonomous processes by themselves are not sufficient to explain the economic, not to mention the social and political, outcomes to which the famous scenarios led. The result, perhaps not much lamented in an age of formalism, is the end of what I believe to be the most remarkable and enduring contribution of economics to intellectual history (Heilbroner, 1990). Can that tradition be revived? The current preoccupation with formalism may fade, but I doubt that the centrality of political decision-making will follow suit. Are scenarios then to be permanently relegated to the museum of antiquities? That is the subject of this essay on the work of Adolph Lowe. Lowe's name is better known among the older generation of economists than among its current practitioners, but I believe his contribution is directly relevant to the difficulties that today stand in the way of making imaginative economic projections into the future. My intention is, therefore, not to present Lowe's work in detail, but to interpret it freely with respect to this question, a liberty I take on the basis of a relationship of mutual criticism and consultation that has gone on since I became his student almost fifty years ago.(1) Accordingly, I will concentrate here on his two most enduring contributions to this subject, On Economic Knowledge and Has Freedom a Future? What makes these books of such immediate relevance is that the first is a systematic exposition of the reasons why scenarios of the classical kind are no longer possible, while the second gives us an example of the kind of projective analysis that might be put in its place. Lowe himself describes the first proposition in the Preface of On Economic Knowledge: I started out as a convinced partisan of the traditional approach as formulated in neo-classical equilibrium theory. At the same time, some work in business cycle theory, in which I was then engaged, made me realize the serious gap that separated all equilibrium models from an economic reality which was subject to wide fluctuations in employment and output. However, I thought it possible to bridge this gap by extending the stationary framework of prevailing models into a dynamic model that would account for the periodic deviations of the economic process from a steady path. Above all, I shared the orthodox opinion that economic theory had to be a self-contained body of generalizations, independent of socio-political considerations of economic systems. A second stage was reached when I abandoned this latter dogma. In other words, I began to recognize that classical, neo-classical, and Marxian theories of the market ... depicted different forms of social and technical organization. But I still believed that industrial market systems, now understood as inclusive socio-economic phenomena, exhibited regularities of motion sufficiently strict to be formulated in laws of coexistence and succession. It is this belief which subsequent experience and reflection have shattered for good, exposing me once again to the fundamental question whether Economics is a proper subject for a theoretical science (Lowe, 1966, p. xvii). Why does economics no longer qualify as a science? Lowe's arguments trace the changing historical matrix within which economic theory emerges and to which it turns its explanatory, predictive power. …

Towards an Alternative Conception of Job-Search Theory and Policy: Information as an Indeterminate Process

The theoretical heritage of job-search models is reconsidered, with a stress on their roots in neoclassical equilibrium theory. A different conception of the “imperfect” information problem is proposed, namely what is called ‘indeterminate’ information. Competing economic and geographical models of job search are reviewed and the logic of indeterminate information applied. A research agenda is introduced, which highlights the role that contracts play in allocating the costs of indeterminate information. Last, implications are drawn regarding the role of public policy.