Neoclassical Model Research Articles

Gendered trait prioritization and motivations for crop varietal choice among smallholder farmers: The case of sweetpotato in Uganda

To improve productivity, several improved high-yielding sweetpotato varieties have been developed and released by breeders. However, most farmers still grow low-yielding landraces known also as farmers’ varieties. Farmers choose varieties to grow based on their preference for the attributes (traits) embodied in those varieties. Past studies have examined drivers of trait preference using neoclassical economic theory. This study departs from previous ones by applying principles from economic psychology to assess preference for, and prioritization, of sweetpotato traits among male and female sweetpotato farmers. Data used was data collected using focus group discussions and laddering, an in-depth personal interview process, and analysed using descriptive and means-end chain analyses. The study identifies mental constructs associated with farmers’ trait preference and prioritization, namely: the characteristics farmers mentally associate with the prioritized traits, the benefits those traits confer, and the life goals (i.e. values) they enable farmers to attain. Focus group discussions revealed that, among agronomic traits, high root yield is the most preferred/prioritized trait across gender categories and was followed by stress tolerance and underground root storage longevity. The most preferred quality traits across gender groups are root size and mealiness. Women, however, prioritized early maturity over men. The means-end-chain analysis identified several mental constructs farmers mentally associated with trait prioritization. They are increased sales, more income, food security, savings, and investment. These benefits are linked to various life goals (values) farmers aspire for namely, respect, security, achievement, and happiness. These findings imply that farmers’ choice of sweetpotato varieties to grow is driven by the agronomic and quality traits the varieties embody. The findings further imply that psychosocial factors underpin trait preference and prioritization by farmers.

Fuel subsidy removal and welfare of the working class in Nigeria: Policy options for the state

Subsidy provisioning has been a feature of market economies around the World since the end of the Second World War. In Nigeria, and other Third World countries, subsidy provision is a major instrument by which Government attempts to enhance the welfare of the masses. Over the years, successive governments in Nigeria have attempted to keep the prices of certain commodities affordable by providing one form of subsidy or the other. The Premium Motor Spirit (PMS) popularly known as Petrol in Nigeria is one of the commodities covered by subsidy until 29th May, 2023 when the newly inaugurated President Ahmed Bola Tinubu in his inaugural speech declared an end to it. A major consequence of the removal of the fuel subsidy is the cut-throat pricing of PMS throughout the country. This paper attempts to interrogate the effect of fuel subsidy removal on the welfare of the working class in Nigeria with a view to ascertaining available policy options for the State. The paper adopts the neo-classical economic theory of government policy and argues that a fundamental responsibility of the State is the protection of the welfare of the citizenry through its various policy decisions. Relying on documentary evidence, the paper found that the removal of fuel subsidy has worsened the living conditions of the working class as not only do workers now have to pay more for fuel; the multiplier effect of a continuous rise in prices of PMS on other basic necessities has made life unbearable. Consequently, the paper suggests a novel approach to the conundrum where in the Federal Government would ensure domestic refining of crude oil for local consumption or reach an understanding with other countries for a non-commercial refining of crude oil for the country.

The Effects of Foreign Direct Investment on Economic Growth (Gross Domestic Product) in Tanzania

This study aims to analyse the effects of Foreign Direct Investment on Economic Growth (Gross Domestic Product) in Tanzania. The World Bank’s data on foreign direct investment and gross domestic product from 1988 to 2021 was employed in order to achieve the purpose of the study. The Vector Autoregressive Regression (VAR) Model was selected, in which a neoclassical growth model was applied within the implementation of this model. According to the findings of the research that was carried out, the Gross Domestic Product was primarily influenced by its prior values, which suggests that the economy is capable of some degree of self-sufficiency in terms of driving changes in the economy. According to the findings, foreign direct investment had a relatively minimal direct impact on gross domestic product, which suggests that other factors played a more significant role in influencing economic performance. There was no bidirectional causal relationship between gross domestic product and foreign direct investment; they both functioned independently of one another. It has been established that endogenous shocks have a significant role in driving changes in both GDP and FDI, which underscores the impact that internal forces have on the economic system. The importance of taking into account internal factors while conducting an analysis of economic growth has been brought to light as a result of these findings, which have contributed to a better understanding of the complex relationship that exists between GDP and FDI.

Green logistics and circular economy in alleviating CO2 emissions: Does waste generation and GDP growth matter in EU countries?

The integration of Green Logistics (GL) and Circular Economy (CE) have been recognized as critical concepts for achieving sustainable economic and environmental performance. However, there is a lack of understanding on the combine impacts of CE and GL in alleviating CO2 emissions in pioneering nations relying on these concepts. This study examines the role of CE and GL sustainable in curbing CO2 emissions of 13 developed European Union (EU) countries from 2000 to 2020. The neoclassical growth and IPAT models, including the pool mean autoregressive distributed lags (PMG-ARDL) and the vector error correction model (VECM) are employed to estimate the short- and long-run effects and heterogeneous causal relationships. The long-run results reveal that CE and GL can mitigate CO2 (carbon dioxide) emissions, while the generation of municipal waste (GMW) has negative impact on the environment. Moreover, the long-run relationship between economic growth, CE, GL, and GMW validates the Environmental Kuznets Curve (EKC) hypothesis. The study also confirms a bidirectional causality between CE, GL, and CO2 emissions over the long run. This study proposes a model for assessing the impact of CE and GL initiatives on environmental performance and sustainability in both pioneering developed regions and emerging economies yet to embrace green growth concepts.

The Role of Neoclassical Macroeconomics in the Development of the World Economy

New classical macroeconomics plays a critical role in the global economy, with its theoretical framework emphasizing free markets, rational choice, and the importance of monetary policy. In the development of the world economy, new classical macroeconomics has promoted the liberalization of capital markets and encouraged international investment and trade. Through the theory of marginal productivity, it focuses on the relationship between wages and productivity, proposing to adjust wage levels to reduce unemployment. At the same time, it emphasizes the impact of monetary policy and rational expectations on lowering the expected level of inflation. New classical macroeconomics emphasizes technological innovation and free market competition, promoting stability and growth in the global economy. Its theoretical contributions to resource allocation, labor market, and inflation control play a positive role in shaping the development of the world economy.

Pursuing a Grand Theory: Douglass C. North and the early making of a New Institutional Social Science (1950-1981)

PurposeThe paper provides a detailed historical account of Douglass C. North's early intellectual contributions and analytical developments in pursuing a Grand Theory for why some countries are rich and others poor.Design/methodology/approachThe author approaches the discussion using a theoretical and historical reconstruction based on published and unpublished materials.FindingsThe systematic, continuous and profound attempt to answer the Smithian social coordination problem shaped North's journey from being a young serious Marxist to becoming one of the founders of New Institutional Economics. In the process, he was converted in the early 1950s into a rigid neoclassical economist, being one of the leaders in promoting New Economic History. The success of the cliometric revolution exposed the frailties of the movement itself, namely, the limitations of neoclassical economic theory to explain economic growth and social change. Incorporating transaction costs, the institutional framework in which property rights and contracts are measured, defined and enforced assumes a prominent role in explaining economic performance.Originality/valueIn the early 1970s, North adopted a naive theory of institutions and property rights still grounded in neoclassical assumptions. Institutional and organizational analysis is modeled as a social maximizing efficient equilibrium outcome. However, the increasing tension between the neoclassical theoretical apparatus and its failure to account for contrasting political and institutional structures, diverging economic paths and social change propelled the modification of its assumptions and progressive conceptual innovation. In the later 1970s and early 1980s, North abandoned the efficiency view and gradually became more critical of the objective rationality postulate. In this intellectual movement, North's avant-garde research program contributed significantly to the creation of New Institutional Economics.

Reforming the Eurozone financial system: A system-dynamics approach

The effectiveness of the current monetary policy of the European Central Bank (ECB) in maintaining (price) stability in the eurozone is assessed using a system dynamic model. The model combines a neoclassical growth model with a stock-flow representation of the eurozone financial sector at a high level of aggregation. With endogenous money creation, the multidirectional relationship between asset prices and net income, and also the dual causality of both liquidity and investment relative to interest rates as the main features of the model, the developments of the past 50 years can be understood and extrapolated to 2050.The simulation experiments indicate that the current pro-cyclic system is inherently unstable. This instability can only be overcome by monetary policy that eases and tightens the total amount of money in the system in a countercyclical manner. An obvious way to achieve this is the introduction of 100% Central Bank Digital Currency (CBDC). This calls for the ECB's mandate to become the sole "monetary authority" that creates and controls the amount of money in the system, with the sole and unambiguous objective of price stability. Money creation to achieve price stability at a targeted level of inflation with simultaneous repayment of public debt varies between €200 billion and €500 billion per year. This money can be channelled into the real economy through the EU's governance structure and spent on tax cuts and/or direct public investments, for example in physical and social infrastructure.

The Historical Projections of Poverty Trapped in the Hegemony of the Capitalist Ideology within the Frame of the World Bank's Quasi-War on Poverty

The World Bank is an important international institution that plays a role in forming the perception of global poverty and the fight against poverty. Since its foundation, the Bank's approach to the concept of poverty and the policies it proposes to eliminate poverty have undergone radical changes. The study aims to reveal the theoretical and practical dimensions of the Bank's approach to poverty with their evolutionary reflections. In the study, different definitions of the World Bank regarding the concept of poverty will be included in the axis of poverty concept and different depictions of the transformation of poverty-related policies over the years. The development approach the Bank has developed for the last 40 years is likely connected to the neoliberal policies loyal to mainstream (neoclassical) economics principles. Therefore, the emphasis on the problem of poverty put by the Bank for the last few decades consists of representing the same political prescriptions to the world economies to solve the problem. In this context, it can be argued that the policies created by the Bank regarding poverty rely on ideological concerns rather than reality since it is clear that the development discourses effectuated by the Bank over the years and the policies for the elimination of poverty generated accordingly cannot be evaluated independently of the dynamics arising from the efforts of the US to perpetuate its hegemony over the international capitalist system.

Léon Walras and Alfred Marshall: microeconomic rational choice or human and social nature?

Abstract Alfred Marshall’s and Léon Walras’s works have often been compared in the literature, on the one hand underlining their several differences and on the other hand focussing on their possible resemblances building what was called ‘neoclassical economics. This interpretation failed to pay due attention, however, to a number of important aspects that in fact stand in the way of a proper understanding of these two authors’ contributions. This paper focuses on the analogies to be found between Walras’s and Marshall’s analyses of economic behaviour, which are related not to a supposed affiliation to a common neo-classical tradition but to a common conception of the relation between human economic agents and society.

Economic growth in the Balkan area: An analysis of economic β-convergence

The Balkan countries undergoing the transition must advance their economies to be more competitive. The aim of this paper is to analyse economic growth with a primary focus on the analysis of economic convergence in the Balkan region in the period of 1997–2020. The research analyses the following Balkan economies: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Greece, Montenegro, North Macedonia, Romania, Serbia, and Slovenia. This study applies Gross Domestic Product (GDP) as a measure of economic growth and is based on the neoclassical economic growth model: the Solow's convergence concept. The results show that the Balkan countries experienced economic convergence with a speed of 1.82% in the cross-sectional model and 7.87% in the panel data model. It means that the initially less developed economies noted higher economic growth than those richer.

The Intersection in Marxist New International Politics and Derrida’s Philosophy: A Meta-Analytics Inquiry of Its Impacts on Western Macro-Economy

The Intersection in Marxist New International Politics and Derrida’s Philosophy: A Meta-Analytics Inquiry of Its Impacts on Western Macro-Economy

After Neoliberalism: Economic Theory and Policy in the Polycrisis1

AbstractMainstream economic theory and policy have struggled to address (and in some cases have made worse) the multiple economic crises since 2008—global financial crash, austerity, stalled productivity, wage stagnation, rising inequality, inflation, climate and environmental breakdown. At the root of this failure is the ‘ontological individualism’ which underpins neoclassical economic theory: the belief that individual households and firms are sovereign actors. It proposes in its place a premise of ‘ontological institutionism’—the view that economic behaviour is primarily influenced by the institutional structures and rules within which it occurs. Commonplace in other social sciences, this view radically changes economic analysis and policy prescription. Based on an explicit ethical definition of policy objectives, the article offers an ‘institutionally pluralist’ view proposing different kinds of institutions for five different spheres of economic life. Arguing that economic policy should be seen as a process of institutional design (not simply making markets more efficient), it offers some illustrative policy proposals in key fields, from climate change to business investment.

Leveraging Behavioral Economics to Decision Architecture

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 branchesmacro 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.

THE RELATIONSHIP BETWEEN GEOGRAPHY AND ECONOMIC GROWTH IN MIDDLE-INCOME COUNTRIES: EVIDENCE FROM PANEL DATA ANALYSIS

All countries aim to achieve stable economic growth. Geography is recognized as one of the main determinants of economic growth as it covers the advantages and disadvantages arising from the physical location of the country. For this reason, revealing the relationship between geography and economic growth can give an idea about the economic policies that can be implemented in terms of how to utilize the advantages or how to reduce the effects of disadvantages. In addition, analyses on the effects of geographical location, climate, natural resources and other geographical characteristics on economic growth help to understand the economy from a broad perspective. This study, using panel data analysis methods with data from 2001-2012, aims to empirically test the relationship between geography and economic growth among 79 countries classified at middle income level according to the World Bank income classification. In line with this objective, various empirical tests were carried out using panel data analysis method. The empirical analyses conducted within the scope of the study revealed that geographical factors are effective on economic growth. Therefore, the inclusion of geographical factors, which are generally ignored by neoclassical growth models, will provide an important perspective for economic growth studies.

Energy transitions research: An assessment methodology

AbstractMarket rules, changes in regulations for users and producers, technological innovation and economic development are important factors shaping energy transitions. Therefore, explaining energy transitions requires a multidisciplinary insight to investigate these factors. The study of energy transitions faces an analytical and methodological challenge, particularly in communicating trends shaping the energy systems in developing economies. The existing literature is not consistent in identifying these disciplines nor proposing how they can be combined. In this sense, this paper proposes a new and simple methodological path to assess variables and theories. It conceptualizes energy transitions as a co-evolution of two types of systems: system innovation with its roots in evolutionary, institutional economics, science and technology studies (STS); and energy systems with its roots in neoclassical and evolutionary economics. From how to conduct a systematic literature review, to how best integrate theories and the analytical framework in which key questions can be answered, the paper elevates the role of political science, as policies play a prominent role in shaping energy transitions. This paper responds to those who have pointed out that the political economy of energy transitions is a vastly understudied area.

Revising the theory behind corporate governance and management control: A reflection and roadmap

I reflect on attempts to revise the theory behind corporate governance and management control in light of evolving organizational and market realities. First, I discuss the resistance to early attempts by prominent neoclassical economists to revise the theory of the firm. Second, I discuss the outcome of that resistance—an economic theory that is largely unable to describe common governance systems and management controls found in practice as well as new systems and controls aimed at increasing the environmental and social responsibility of the firm. Finally, I describe recent efforts to revise the theory by relaxing the assumption of narrow self-interest, incorporating insights from stakeholder theory, and incorporating important individual and social factors left out of the theory. I conclude by discussing how these revisions provide a roadmap to further revisions in the theory to improve its usefulness to researchers, practitioners, and policymakers.

Misallocation, Productivity and Development with Endogenous Production Techniques

We study misallocation and sectoral productivity in a heterogeneous firms model with generalized production. Different from neo-classical models of production, our model endogenizes production-techniques and introduces firm-specific technique-distortions alongside factor- and scale-dependent distortions. Applying this micro-founded framework to firm-level data (US, China and India), we quantify that, for a broad range of manufacturing industry clusters, technique distortions generate more severe misallocation and sectoral TFP losses than capital and output distortions, accounting for about three quarters of the detrimental productivity effects. We thus uncover a quantitatively important channel for productivity growth and economic development resulting from within-firm organization of production.

Exploring the fittest choice model for consumer preference analysis on over-the-top service

This study analyzed consumer preferences in the over-the-top service market by comparing classical and behavioral economics approaches. Empirical analysis indicated that the reference-dependent choice model based on behavioral economics brought marginal improvement in model explanatory power compared with the discrete choice model based on neoclassical economics. The underperformance of the behavioral model is suspected to stem from the over-the-top service market's characteristics. The performances of the behavioral and neoclassical models were similar, and the results from the behavioral model can be utilized to deliver further insights from the neoclassical model by replacing or complementing it.

Influence of optimal room occupancy strategies on revenue maximisation during slack periods in selected 3- to 5-star hotels in Ghana

ABSTRACT: An organisation’s inability to generate adequate income to sustain its business activities poses a significant challenge to maintaining profitability. Employing revenue-maximisation strategies is crucial to securing necessary resources and ensuring the continued success and stability of organisations. The purpose of this study was to examine the strategies adopted to achieve optimum room occupancy during slack periods to maximise revenue in 3-5 star-rated hotels in selected regions of Ghana. The study adopted a descriptive survey and incorporated mixed methods for data collection. The study was guided by neoclassical economic theory. The Yamane formula was used to determine a sample size of 60 hotels rated 3- to 5-star from the study sites. A stratified simple random sampling was employed to select 60 hotels that were used as study sites. In each hotel, eight respondents — general managers and departmental supervisors — were targeted, giving a total of 480 respondents. A purposive sampling method was used to select eight key informants from each category, drawn from the Ghana Tourism Authority and the Association of Hoteliers. Questionnaires were used to collect quantitative primary data from general managers and department heads. Key informant interview schedules were used to collect qualitative data from key informants. A multiple linear regression model was used to predict the overall relationship between independent and dependent variables. The analysed data was presented in tables and charts. The results revealed a significant correlation (R −0.823 = 82.3%) between the strategies employed to achieve optimal room occupancy. Based on the findings, it is recommended that 3- to 5-star-rated hotels in Ghana continue to focus on offering special rates and targeted marketing campaigns to attract guests, as well as collaborating with other stakeholders to expand their reach.

Amartya Sen as a Neoclassical Economist

Amartya Sen is often described as an insightful critic of mainstream economics, and in particular, his work in development economics, alongside the construction of the capabilities approach, has been associated with endeavors to revisit both the theory and practice of the discipline. Despite his in-depth criticisms of certain aspects of mainstream economics, Sen’s extensive use of formal methods is suggestive of an ontological tension, one identified by Thorstein Veblen when commenting on some of his contemporaries and originally introducing the term “neoclassical.” Veblen argued that the work of these economists involved both an implicit recognition of a causal processual social ontology he associated with modern, thoroughly evolutionary, approaches and a commitment to a taxonomic conception of science—the latter relying on a set of methods that presupposed an associationist ontology of event regularities. For Veblen, the adherence to taxonomic methods was the classical feature of their work, and the commitment to an evolutionary viewpoint was the neo aspect. This article argues that the same tension runs through Sen’s contributions and that he is neoclassical in this specifically Veblenian sense. The assessment of the ontological inconsistencies in Sen’s work is shown to shed light on its reception within the economics academy.