Neoclassical Theory Research Articles

Port Revenue Performance and Economic Growth: The Nigerian Ports Authority Experience, 2010-2019

Abstract The Study examined Port Revenue Performance and Economic Growth: The Nigerian Ports Authority Experience, 2010 to 2019. The objective of this study is to examine the effect of Port Revenue Performance on Nigeria's economic growth by critically evaluating the Nigerian Ports Authority Performance. The neoclassical growth theory was employed in the study and the Nigeria Ports Authority was chosen as its sample, covering the period from 2010 to 2019. The study used secondary time series data sourced from the Nigeria Ports Authority and the National Bureau of Statistics and used the ordinary least square regression and the Engle-Granger co-integration to test the variables at the 5% level of significance. The findings showed that total revenue to gross registered tonnage had positive and significant effect on economic growth while operating surplus to operating revenue showed a negative but significant effect and operating surplus to cargo throughput showed insignificant effect; there was no co-integration between the variables. The study concludes that Port revenue performance affects economic growth in the short-run only, and it recommends amongst others that policy makers should formulate appropriate and implementable regulatory framework that will address infrastructural deficits at the ports and stimulate increased utilization by major foreign vessel companies.

A note on Heterodox Macroeconomics by Blecker and Setterfield

Blecker and Setterfield's new textbook from 2019 presents an updated discussion of heterodox models of growth and distribution. This note clarifies and elaborates on three important issues discussed in the book. First, the text presents mainly one-sectoral and one-technique models, which is a reasonable set-up to keep things simple but not always enough to discuss some controversial issues. Second, continuous substitution is important but not essential for neoclassical growth theory. Third, the popular Goodwin model presented in the text does not produce ‘limit cycles.’

Functional monetary aggregates, monetary policy, and business cycles

In this paper, we take the economic approach to monetary aggregation. In the context of highly disaggregated demand systems, encompassing the full range of monetary assets in the United States, we estimate the effectively globally regular minflex Laurent (ML) and normalized quadratic (NQ) flexible functional forms. We produce the ML and NQ functional monetary aggregates, consistent with neoclassical microeconomic theory, also addressing the issue of optimal monetary aggregation. We highlight the influence of measurement on statistical inference by investigating whether the ML and NQ functional monetary aggregates are of importance in resolving paradoxes associated with the measurement of money. In doing so, we also provide a comparison between the functional monetary aggregates and the Fed’s (broad) Sum M2 aggregate and the Center for Financial Stability (broad) Divisia M3 and Divisia M4 aggregates. Our detailed statistical analysis favors the functional monetary aggregates.

Energy, Entropy, Constraints, and Creativity in Economic Growth and Crises.

The neoclassical mainstream theory of economic growth does not care about the First and the Second Law of Thermodynamics. It usually considers only capital and labor as the factors that produce the wealth of modern industrial economies. If energy is taken into account as a factor of production, its economic weight, that is its output elasticity, is assigned a meager magnitude of roughly 5 percent, according to the neoclassical cost-share theorem. Because of that, neoclassical economics has the problems of the “Solow Residual”, which is the big difference between observed and computed economic growth, and of the failure to explain the economic recessions since World War 2 by the variations of the production factors. Having recalled these problems, we point out that technological constraints on factor combinations have been overlooked in the derivation of the cost-share theorem. Biophysical analyses of economic growth that disregard this theorem and mend the neoclassical deficiencies are sketched. They show that energy’s output elasticity is much larger than its cost share and elucidate the existence of bidirectional causality between energy conversion and economic growth. This helps to understand how economic crises have been triggered and overcome by supply-side and demand-side actions. Human creativity changes the state of economic systems. We discuss the challenges to it by the risks from politics and markets in conjunction with energy sources and technologies, and by the constraints that the emissions of particles and heat from entropy production impose on industrial growth in the biosphere.

Flexible Production Technology, Systematic Risk, and Stock-Level Investment Anomalies

We offer evidence that the tendency of high real-investment stocks to underperform others (“investment anomaly”) is almost entirely attributable to firms physically constructing new capacity. The conditioning ability of construction work does not come from constructing firms making larger investments, relying on other financing sources, or being differentially profitable over or after the investment year. Yet, it may arise from their profits becoming less sensitive to their industries' conditions after that year. Setting up a real options model of the firm in which newly-built capacity becomes operational only after a time-to-build period but ultimately produces profits which are less sensitive to negative demand shocks over some random time, we show that our evidence is consistent with neoclassical finance theory.

The conflict between market competition and worker solidarity: moving from consumer to a citizen welfare standard in competition law

AbstractThis paper critically investigates the law and economics of competition law enforcement in conflicts between workers and employers in the EU and the US. The conflict between worker solidarity and market competition attracts significant public attention due to the legal conundrum facing precariously employed gig workers. This paper reveals that in light of the strict consumer welfare standard underlying competition rules, competition law has become an overall disciplining mechanism impeding collective worker action beyond the limited case of the gig economy. Using a holistic theoretical framework comprising of neoclassical and Marxist exploitation theories, the paper shows that sound economic analysis justifies resolving the competition–solidarity conflict in favour of solidarity. After showing that the consumer welfare standard overlooks the idiosyncratic qualities of labour as a ‘fictitious’ commodity, the paper offers an original and inclusive ‘citizen welfare’ standard that takes into consideration how anti-competitive behaviour affects workers as well as consumers. As a result, the paper also contributes to the post-2008 debate on whether and how competition law could contribute to equality by shedding light on competition law's treatment of workers and their welfare.

Enhancing or suppressing: The effect of labor costs on energy intensity in emerging economies

The existing literatures have not systematically studied and reached a consensus on the relationship between labor costs and energy intensity. This study introduces the mediation model to solve the theoretical disputes, and proposes three mediating effects of labor costs on energy intensity, i.e., substitution effect, industrial structure effect, and total factor productivity effect. The bootstrap confidence interval method and causal steps approach are used to test the mediating effects and decompose total effect. As indicated by the empirical study using panel data of 22 emerging economies, the total effect of rising labor costs on energy intensity is negative. The contributions of substitution effect, industrial structure effect and total factor productivity effect to the total effect are −21.8%, 8.9% and 76.4% respectively. Therefore, the total factor productivity growth turns out to be the main way in which labor costs affect energy intensity in emerging economies. These findings provide new empirical support for the Neo-classical growth theory and Environment Kuznets Curve hypothesis from the perspective of labor costs.

Evolution of Organisation Theory: A Snapshot

This paper is a review and critique of the evolution of organisations theory. Organisations and managers are regularly faced with challenges from the environment of business and these challenges evolve and cause them to shift and adapt regularly and transform themselves to meet the expectations of their clientele. This paper examined the pre-classical, classical, neo-classical and modern theories of organisation to review how they also evolve to meet the needs of the organisation each time. Organizations operate in fluid environments; therefore, it is vital for them to align and re-align their elements and structure in order to survive and compete effectively. We conclude that these theories each have their advantages and flaws but the manager should choose the one that best fits the organization processes per time.

The Mathematical Mistakes of the Neoclassical Theory and its Reformation

This paper completes my previous paper A Revision of the Theory of Perfect Competition and of Value with a more global analysis of the mathematical mistakes of the neoclassical theory. During the second half of the twentieth century Microeconomic theory moved increasingly away from price theory, which was gradually displaced by more modern trends such as game theory, behavioral-empirical-experimental economics, industrial organization, neuroeconomics, heterodox economics, etc. This was due to serious shortcomings and (mathematical) mistakes of the traditional theory that is based on Neoclassical economics. The most obvious of those mistakes is that the equilibrium point does not maximize the profits of firms, as they are maximized at the intersection of total supply (marginal cost according to neoclassicals) with the marginal revenue from the total demand and not with the total demand itself as neoclassicals argue. The correction of those mistakes entails dramatic changes in the Neoclassical theory and its fundamental outcomes, concerning perfect competition, price determination, value theory, income distribution, social welfare, and other major fields of economics. This reformation results also in an integrated theory in which market works, regardless of the number of firms, i.e. from monopoly to perfect competition. But most importantly, by this reformation traditional price theory regains its self-efficiency, prestige, and dominant position in economics.

Sustainable Financial Risk Modelling Fitting the SDGs: Some Reflections

This article argues that any ecological finance theory devised to fit the Sustainable Development Goals (SDGs) needs a paradigm shift in the morphology of randomness underlying financial risk modelling, by integrating the characteristics of “nature” and sustainability into the modelling carried out. It extends the common diagnosis of the 2008 financial crisis with considerations on the morphology of randomness and the reasons why neoclassical finance theory is not sustainable from this perspective. It argues that the main problem with unsustainable neoclassical finance risk modelling is its underlying morphology of randomness that creates a dangerous risk culture. It presents Leibniz’s principle of continuity and Quetelet’s theory of average as cornerstones of classical risk culture in finance, acting as a mental model for financial experts and practitioners. It links the notion of sustainability with the morphology of randomness and presents a possible alternative approach to financial risk modelling defined by rough randomness. If morphology of randomness in nature is properly described by fractal and multifractal methods, hence ecological finance theory has to include fractal properties into financial risk models. The conclusion proposes a new agenda for future research.

Technology-driven growth and inclusive growth- implications for sustainable development in Africa

The 21st century industrial and digital age has been largely driven by technological dynamics and advancement. The Neo-classical argued that beyond the classical notion of investments and capital accumulation, technology growth, which is driven by innovation and development is a major driver for growth and development. Africa economies, which has been largely described as technologically dependent, has over the years through technological diffusion engaged modern processes in driving its economic activities, which has informed economic and even social outcomes. Therefore, using the generalised methods of moments for selected sub-Saharan African economies, this study intends to assess the extent to which the presence of technology has informed economic activities in Africa as well as its impact in addressing developmental issues of poverty and unemployment. Also, given the current drive towards sustainability, this study takes the neo-classical growth theory a step higher by examining the modulating effects of technology-driven growth (through mobile densities and ICTs) in setting the pace for sustainable development in Africa. The study shows that the expected long-run impact of a technology-induced growth in reshaping developmental outcomes is seen from the estimates.

‘The Provocative Joan Robinson’ Was Completely Ignorant of Keynes ’S Chapter 21 Is-Lm Model on Pp. 298–299 of the General Theory Even Though She Supposedly Read the Final 1935 Draft of the General Theory: The Exchanges of September to November, 1936 Between Keynes and Robinson Show Her Complete Ignorance

‘The Provocative Joan Robinson’ Was Completely Ignorant of Keynes ’S Chapter 21 Is-Lm Model on Pp. 298–299 of the General Theory Even Though She Supposedly Read the Final 1935 Draft of the General Theory: The Exchanges of September to November, 1936 Between Keynes and Robinson Show Her Complete Ignorance

Managing the increasing returns of a high-tech business model in industry: Classic and ecosystem effects

Business model management is possible on the basis of detailing and clarifying methods for calculating forms of increasing returns. High-tech companies, in contrast to traditional ones, have additional rents associated with the dual use of technologies and digitalization. The article develops a set of methods for assessing the cumulative increasing returns of a hightech business model based on the calculation of classic and ecosystem effects. The neoclassical economic theory, the network (relational) approach, the concepts of business models and ecosystems constitute the methodological basis of the study. The authors differentiate between five forms of returns: economies of scale effects, effects of innovation, diversity, direct and indirect network-based (ecosystem) effects. The research method is pioneered by the authors and based on a sequential assessment of the five forms of returns. For each form, an optimal calculation method is proposed, the results of which are unified by the standardization method. The level of increasing returns is empirically calculated using the case study of the civil production of the Semikhatov Scientific and Production Association (SPA) of Automatics – one of the largest high-tech industrial enterprises. The paper highlights the problems in measuring returns, such as the lack of panel data on the enterprise, a uniform method and relevant examples for calculation, as well as objective data on sectoral markets. The research results prove that the key management objective is to enhance the positive difference between increasing and decreasing returns through transformation of the business model. To achieve this objective, we compile a matrix of effects, the level of which allows making appropriate management decisions. Our calculations show that the enterprise experiences decreasing returns from adoption of innovation. The level of increasing returns from the learning effect and the direct network-based effect is quite low, which indicates that the enterprise’s business model is traditional, rather than technological. The research results can serve as a basis for the development of a detailed management mechanism for transforming a business model. The method for increasing returns assessment is universal and can be applied to evaluate the effectiveness of any business models.

SUSTAINABLE AGRICULTURE, POVERTY REDUCTION AND ENHANCED LIVELIHOOD: A THREE-STEP APPROACH TO SUSTAINABLE DEVELOPMENT IN NIGERIA

The majority of the population in most third world countries resides in the rural areas where farming is the predominant occupation. This study interrogated the extent to which sustainable agricultural practices can transform a rural farm population from one that is essentially poor to a vibrant semi-urban population whose standard of living is greatly enhanced in terms of income generation, access to basic necessities of life, education, sanitation, etc. Data was sourced from secondary materials which include books, magazines, journals, periodicals, newspapers, the internet, etc. the neoclassical theory of a linear closes system (Pearce, 1972) was adopted as the theoretical framework while the mode of content analysis employed as the tool of analysis revealed that a sustained agricultural practice can facilitate the process of poverty alleviation, improve the general welfare/living standard of the citizens and enhance the attainment of sustainable development in Nigeria. Government is therefore, advised to make greater effort at boosting sustainable agricultural practices as an avenue of facilitating sustainable development in the country.

The Impact of Structural Funds on Regional Growth: A Panel Data Spatial Analysis

The European Union is one of the most prosperous areas of the world. However, huge disparities remain among its member states and regions. Given the persistence of those large regional inequalities, it is pertinent to analyse the efficiency of structural funds. In light of the neoclassical theory, these funds should contribute to improving the economic efficiency among the poorest regions, promoting regional convergence. However, the new economic geography states that structural funds may also facilitate the geographic concentration of economic activities, thus perpetuating regional imbalances. This article measures the impact of structural funds on regional convergence using a spatial econometric approach applied to an extended sample of European regions across a long time interval. Based on data for 96 EU regions during the period 1995–2009, a Durbin model with panel data is estimated in order to capture the effects of spatial dependence in both the lagged dependent variable and the independent variables. The results confirm the existence of conditional convergence and the importance of neighbourhood and spillover effects but do not detect the existence of positive impacts from structural funds.

The Cambridge–Cambridge controversy on the theory of capital: 50 years after*

The paper points out that capital theory has always been a hotly debated subject, partly because the theoretical issues involved are very complex, and partly because rival ideologies and value systems directly affect the issues discussed. The focus is on the history, the main protagonists, and the relevant problems examined and argued about during the two Cambridges controversy on the theory of capital which was at its peak 50 years ago. Whereas one clear result of these debates is that neither Samuelson's surrogate production function nor Solow's rate-of-return concept could resurrect aggregate neoclassical theory, many other questions, such as the treatment of capital in temporary or intertemporal general equilibrium models or the empirical relevance of the reswitching phenomenon, are still discussed controversially.

Brexit or Euro for the UK? Evidence from Panel Data

An alternative course to Brexit for the UK is evaluated. The purpose of the study is to determine whether the UK would have been better off had, instead of Brexit, remained in the EU and joined the Eurozone. The model specification is based on the neoclassical theory of growth extended to include human capital accumulation. Counterfactual analysis in terms of the difference-in-differences methodology is applied to evaluate the effect in UK’s per capita income if the UK had joined the Eurozone when the Eurozone was formed. The dataset is a balanced panel of annual observations for fifteen countries and covers the period from 1980 to 2017. The analysis reveals that had the UK joined the Eurozone, UK’s per capita income would have been 15.48% higher on the average for the period after the formation of the Eurozone. This effect increases to 24.98% if Eurozone’s less performing economies of the southern periphery are excluded from the analysis. The study shows that Brexit is a move toward the wrong direction. The UK should have sought further integration with the EU in terms of presence in the Eurozone than pursue Brexit and leave the EU.

Directions of the Reproduction Process Transformation in Modern Russian Economy

The article is devoted to the analysis of the modern aspects of the reproduction process transformation in the context of the development of Russian economy. To achieve this goal, the work analyzes the transformation of the stages of social reproduction, as well as evaluates its impact on the relevant process scheme. It has been established that today each stage is undergoing significant changes, in particular, production methods and manufactured products are improved, the distribution of resources between sectors of economy is changing, exchange processes are expanding, and goals and methods of consumption are transformed. Among the features of modern reproduction models, the growth of the non-material sphere due to the development of the service market and their integration with material production, the implementation of the reproduction of a social product based on innovative production and Schumpeter competition, the establishment of human capital being a source of innovation as the basis of the reproduction process, should be noted. The current level of the development of Russian economy and promising requirements for the reproduction process in the neo-industrial model lead to the need to separate the stage of institutional and technological design of the product life cycle and to include a separate phase of scientific training in the traditional chain of stages of the social reproduction process. The results of the work can be used as a supplement to modern neoclassical theories and re-actualized political and economic methodologies.

Business Cycles in a Dynamic General Equilibrium Model with Monopolistic and Perfect Competition

The purpose of this study is to explain business cycles by developing a neoclassical growth model with perfect and monopolistic competition. The study generalizes the model by Zhang (2019) by making all the constant coefficients to be time dependent. The model determines income and wealth distribution on the basis of Walrasian general equilibrium theory, neoclassical growth theory, and Dixit-Stiglitz monopolistic competitive theory. The paper makes a unique contribution to the literature of economic growth with perfect and monopolistic competition by showing existence of business cycles due to exogenous shocks in the model with the economic mechanisms in the three main models of economic theory. The study shows how different shocks cause business cycles as argued by real business theory in macroeconomics.

Sovereign Currency and Non‐Sovereign Budgets: The Modern Money Theory Approach

This paper will present the Modern Money Theory approach to government finance. In short, a national government that chooses its own money of account, imposes a tax in that money of account, and issues currency in that money of account cannot face a financial constraint. It can make all payments as they come due. It cannot be forced into insolvency. While this was well‐understood in the early post‐war period, it was gradually “forgotten” as the neoclassical theory of the household budget constraint was applied to government finance. Matters were made worse by the development of “generational accounting” that calculated hundreds of trillions of dollars of government red ink through eternity due to what neoconservatives label “entitlements” (largely, Medicare and Social Security). As austerity measures were increasingly adopted at the national level, fiscal responsibility was shifted to state and local governments through “devolution.” A “stakeholder” approach to government finance helped fuel white flight to suburbs and produced “doughnut holes” in the cities. To reverse these trends, we need to redevelop our understanding of the fiscal space open to the currency issuer—expanding its responsibility not only for national social spending but also for helping to fund state and local government spending. This is no longer just an academic debate, given the challenges posed by climate change, growing inequality, secular stagnation, and the rise of Trumpism.