Neoclassical Theory Research Articles

Joan Robinson’s intelligible Marxism and The Accumulation of Capital: a generalisation of the two-sector reproduction scheme

Abstract Joan Robinson sought to make Marx’s economics intelligible to both academic colleagues and followers of Marx, in a twofold approach. First, she adopted Kalecki’s antipathy to the labour theory of value and his insights (following Rosa Luxemburg) into realisation problems in the schemes of reproduction; second, following Sraffa’s reading of Ricardo, she recognised the importance of surplus production as an alternative to neoclassical theory: both culminating in a stripped down two-sector scheme her mature work, The Accumulation of Capital. This scheme is recast here as an input–output framework, providing a generalisation that addresses some of its limitations: the need for an interface with the Kahn/Keynes employment multiplier, the absence of circulating capital inputs, and the lack of a systematic treatment of prices. Furthermore, a somewhat surprising result is the derivation of a core role for Marx’s category of surplus value in the employment multiplier derived from Robinson’s system.

Looking up and down and round and round: a theoretical–empirical, individual-level analysis of income comparisons

Abstract Income comparisons imply that individuals care not only about the absolute value of their income but also about its relative value. Such comparisons likely have significant societal consequences while also challenging standard neoclassical economic theory. I argue that a better understanding of income comparisons requires a more systematic, theoretical engagement with three problems: (1) the problem of reference group selection, (2) the problem of orientation, and (3) the problem of functional form. Income comparisons are commonly attributed to interdependent preferences, in particular to envy. I propose an alternative theoretical approach in which comparisons are a rational means for individuals to improve upon imperfect information about their current earning potential. I test the empirical implications of both approaches for reference group selection, orientation, and functional form using individual-level data from the Netherlands. The evidence suggests that imperfect information drives comparisons, but interdependent preferences also play a role.

Against the Streams: Alain Parguez and the Theory of the Monetary Circuit

Alain Parguez, together with Bernard Schmitt and Augusto Graziani, is one of the founders of the modern theory of the monetary circuit. Parguez was making his first forays into monetary circuitism in the 1970s, in the years of my formation, when I came in contact with Augusto Graziani. Graziani’s and Parguez’s reflections were independent, but converging. In the article, I consider the parallels and divergences. I will recall some elements of Alain Parguez’s early version of the theory of the monetary circuit. Like Graziani, Parguez was in stark opposition not only to neoclassical theory and ‘bastard’ Keynesianism, but also with a significant part of the post-Keynesian strand. Parguez’s thinking was against the streams (plural): not only the mainstream, but also much of the so-called alternative approaches. In the late Parguez, an undeniable (but limited) connection with Modern Money Theory was emerging. It might seem that over time Parguez reached conclusions dissenting from Graziani, and his own earlier version of the circuit. I will try to give some arguments for my view that this is only partially true, and that some differences are overstated. I will also address some of Parguez’s views on economic policy.

Marxian Analysis of Capitalism and Crises

ABSTRACT The subject of economics, which was once famous for several views and schools of thought, has been limited to just one school neoclassical: where markets usually find equilibrium, meaning government intervention is not needed, and any such intervention could hinder the economic growth process and smooth functioning of the economy. The neoclassical theory focuses on the behaviour of individual agents, which are assumed to be economic decision-makers. There is an attempt to emphasise the importance of the Marxist approach to analysing capitalist crises logically and historically. The study of economics must stay close and keep unity between different social sciences, especially sociology, political science, and history, which classical economists had established but marginalist economists had tried to undermine. The study concludes that economics is embedded in society and politics, and the mainstream school of thought ignores this. They cannot effectively address the main economic issues of our times, which include combating rising inequality, economic and environmental crises, and biodiversity loss.

Market Orientation as a Comparative Advantage Tool: Ankara Province Research Example

Within the scope of the study, the Comparative Advantage Theory of Competition,theResource Advantage Theory,was explained and compared with the Neoclassical Perfect Competition Theory, which was criticized for not being applicable in today's economic conditions. The theory has been examined at the business level. The basis of the theory is that the solid andinimitable resources of the business give the business a competitive advantage in the market. To emphasize resource superiority, market orientation, a competitive tool, was used to support the theory statistically. Two hundred twenty-onebusinesses operating in Ankara with over twenty employees were selected as the research sample. The effect of market orientation on superior financial performance was analyzed by performing multiple linear regression analyses on the obtained data. As a result of the research, it was confirmed that market orientation is a source of comparative advantage, and the theory was statistically supported.

Impact of labour migration on international business environment

It has been established that international migration contributes to optimizing the distribution of human capital, reducing interregional differences, and improves the functioning of labour markets, the international business environment of host countries and countries of origin. A generalization of the results of previous empirical studies suggests that the positive effect of migration is higher than the negative effects of impact on national markets, while this impact is different for highly and low skilled workers, for firms and employees, and for producers and consumers. In the host countries, migration allows filling job positions in what the indigenous population does not agree to work, contributes to the expansion of production and lowering of the tax burden on the working population. In countries of origin, migration reduces unemployment and makes the national labour market more flexible. Thus, international labour migration opens up new opportunities for the socio-economic development of host EU member states, provoking a large number of problems both at the level of society and the state. The current stage of integration processes in the EU is accompanied by the rapid development of external migration processes, so the unified EU migration policy must be implemented taking into account the problems associated with the mass flows of immigrants to European countries, the consequences of the financial and economic crisis, the current trends in European labour markets, and the real needs of these labour markets. It should be noted that the existence of a direct link between migration and the unemployment rate and difference in income makes it possible to empirically confirm one of the main tenets of the neoclassical macro-level theory that migration arises as a result of the difference in income between regions (countries) and the existence of labour surplus in the region where the migrants come from. Consequently, workers migrate from low-wage and labour surplus regions to high-wage and labour shortage regions. Thus, a migrant's goal is to maximize its income and minimize its costs.

State Policy in the Sphere of Ensuring Economic Security: Management Aspect

"It is shown that the problem of forming the policy of economic security requires study in connection with the need to improve the theory and practice of the formation of state economic policy, as well as the study of certain problems related to the peculiarities of the functioning of the mechanism for ensuring economic security. Modern economic policy, guided in most cases by the provisions of neoclassical economic theory, in particular the monetarist theory of state influence on the economy, is not always effective enough, and state failures are becoming increasingly more frequent when various deviations of the actual conditions of economic development from classical models occur, which is especially obvious at present, with the increasing influence of the factor of geopolitics and geoeconomics on the economic security of states."

Examining the trade-offs in clean energy provision: Focusing on the relationship between technology transfer, renewable energy, industrial growth, and carbon footprint reduction

Sustainable energy mitigates climate change by reducing reliance on coal and oil for power generation, curbing global warming. It addresses environmental concerns and yields economic benefits—reduced fossil fuel dependence, financial inclusion, productive employment, and economic development. This research examines the impact of regional economic integration on environmental sustainability in 39 high-income European and Central Asian (ECA) nations from 2017 to 2021. Specifically, the study analyzes the influence of green energy demand, technological transfers, and trade openness on carbon emissions. The study employed various estimators, namely, a two-step Generalized Method of Moments (GMM) estimation, quantile regression, and the cointegration panel approach. These estimators were utilized to capture different aspects and dynamics of the research variables. The study finds that regional green programs and trade agreements effectively reduce carbon emissions, while technological advances and industrial output tend to raise them. Granger causality analyses reveal that emissions-led regional development, technical innovation, and trade openness are interconnected factors, and the deployment of renewable energy contributes to carbon emissions. The inter-temporal analysis suggests that regional economic integration factors will likely impact carbon emissions in the following decade. These findings support neoclassical growth theory, new institutional economics, and ecological modernization theory. Developing renewable energy sources in the region can minimize energy price fluctuations, strengthen energy security, and align with the carbon neutrality agenda. This research emphasizes the need for sustainable energy strategies and regional cooperation to foster a greener and more sustainable future.

A Consumer Behavior Theory of Tutoring

The paper aims to explore the behavior of consumers in the tutoring market in China, in which consumers perspectives would be divided into two parts: parents and students. Parents and students would consider and focus on different factors to maximize the utility based on their own standpoint, which is the reason why they usually make different decisions in reality. The paper would build a theory of consumer behavior in tutoring market based on the neoclassical consumer theory. There are several essential features that should be noticed in the paper: (1) for simplifying, the commodities consumed in the market are the average scores that are estimated to increase based on the original average scores; (2) the consumers decisions are subject to two resource constraints of money and time; (3) the utility is not only a function of goods but also of the time that is required to finish consuming it, in other words, the time a student needs to spend for earning one more score.

Thresholds of external flows in financial development for environmental sustainability in sub-Saharan Africa

PurposeThe study aims to complement extant literature by assessing linkages between financial development, external flows and CO2 emissions in 27 sub-Saharan African countries for the period 2002 to 2018.Design/methodology/approachThe empirical evidence is based on interactive quantile regressions and external flows consist of remittances, foreign aid, trade openness and foreign investment.FindingsThe findings show minimum levels of external flows that should be reached in order for the interaction between external flows and financial development to promote environmental sustainability in terms of reducing CO2 emissions. The minimum thresholds are critical levels of external flows that should be reached before financial development promotes environmental sustainability.Research limitations/implicationsPolicy implications – The disclosed external flow (i.e. FDI, foreign aid, trade and remittances) thresholds are actionable policy thresholds that the government can act upon in order to influence environmental sustainability by means of financial development. Theoretical implications – The findings below the external flow thresholds are consistent with the dependency theory in that external flows are harmful to socio-economic progress and environmental sustainability. When external flows are consolidated to the established critical masses or thresholds in the long run, the corresponding findings are in line with the extant neoclassical and endogenous growth theories, not least, because in the long run, external flows are associated with technological progress and adoption of stronger environmental legislation at the domestic level which are worthwhile in promoting environmental performance.Practical implicationsTo reach the minimum trade and FDI levels that are worthwhile for the promotion of environmental sustainability, corporations should set targets on exports and imports as well as foreign investment levels that they have to attain in contributing to the national target of external flows needed to reduce CO2 emissions. Such trade and FDI targets should be set in industries of various economic sectors.Originality/valueThe study complements the extant literature by assessing how external flows interact with financial development to influence CO2 emissions.

The non-payments economy: 30 years later

The paper analyzes the reasons and consequences of the dominance of the non-payments economy in Russia in the 1990s. Arguing with a recent paper by A.B. Chubais “Non-payments in the Russian economy of the 1990s: An unforeseen institution” (Voprosy Ekonomiki, 2003, No. 7), the author puts forward his own arguments for the emergence, spread and contraction of the phenomenon of non-payments. According to his point of view the fundamental reason for developing the barter economy in Russia was the need for directors and managers of enterprises to obtain empirical information and knowledge about the new structure and possibilities of the Russian economy. The methodological miscalculations of the authors of the concept of market reforms of the 1990s, associated with excessive trust in neoclassical economic theory, in particular, in the neoclassical concept of the firm, have been discussed. A broader view of the activity and interaction of economic agents has been proposed. It takes into account the achievements of institutional, evolutionary, behavioral, and system economic theories. An analogy between the early 1990s and the early 2020s in terms of the formation of the data economy and, in the future, the knowledge economy has been drawn. On the basis of the conducted analysis general recommendations for economic theory, policy and practice have been formulated.

Two currencies – Rethinking energy and the economy

Beginning with the marginalist revolution of the late nineteenth century, neoclassical economic theory developed by borrowing mathematical constructs from physics, but not the physics itself. Several scholars, including early ecological economists, recognized there was a need to incorporate energy and other resources into economic theory. In recent decades there have been attempts to fuse energy into aggregate neoclassical production functions, but these suffer from several challenges: they do not hold at an aggregate level; do not capture the dynamic evolution of the economy; ignore the universal flow of energy through all of the economy; and there is interdependency between variables. These challenges are largely addressed by energy-linked computable general equilibrium models, although their model formulations still understate the role of energy as the lifeblood of economies.Here I argue that the economy can simultaneously be studied in terms of physical units and monetary units. I contrast physical science and social science views on energy in economies, and demonstrate how thermodynamics and value theory can be used harmoniously with an example of the energy basis to capital formation in the United States. When used to study major transformation of energy systems, equations, or metrics, are required for each type of energy carrier in the economy.

The Minimum Wage as a Tool for Racial Economic Justice

Participants at the 1963 civil rights march on Washington supported minimum wage laws using arguments of economic justice. Many economists at the time argued against the minimum wage based on efficiency concerns rooted in neoclassical theory. After decades of debate, where does the economics profession stand on the justice and efficiency claims of the minimum wage? We discuss the evolution of the minimum wage literature in economics, focusing on racial justice. We highlight recent empirical papers that overwhelmingly support the position of the marchers on Washington while at the same time showing little to no loss of economic efficiency. (JEL D63, J15, J22, J31, J38, K31)

The Empirical Measurement and Determinants of Intra-Industry Trade for a Developing Country

The analysis computed the trends and determinants of India’s bilateral composite IIT as well as sectoral IIT with select trade partners. In particular, Grubel - Lloyd Corrected (Grubel and Lloyd, 1975; Aquino, 1997) indices have been used for the empirical analysis involving bilateral aggregate and bilateral sectoral IIT respectively. The empirical results provide evidence for a major part of actual IIT to be explained outside the framework of the neoclassical theories of international trade. The major findings are as follows. First, India’s aggregate as well as sectoral IITs in general displayed a positive time trend with the ROW. This signifies that the country’s two-way manufacturing trade in general and its IPN participation with partners in particular has considerably deepened over the period. Second, the regression analysis indicates that several demand-related (e.g., income difference), supply-oriented (e.g., technology difference), friction-led (e.g., distance, trade facilitation, contiguity, language) and sector-specific (e.g., average labour productivity, vertical product differentiation) factors display a strong statistical relationship with IIT as expected. Third, the empirical analysis strongly underlines the importance of trade facilitation measures in enhancing IIT, which needs to be viewed in a wider perspective. As presence of poor connectivity framework raises transport costs and discourage trade in parts and components (i.e., the relatively low value-added items) significantly, the two-way trade (i.e., IIT) in a wide range of manufacturing product segment can be affected. Fourth, as diversification of product baskets (i.e., product differentiation) happens to be a significant driver of IIT, there is a strong case to focus on technological innovation through research and development (R&D), for maintaining intra-sectoral manufacturing trade flows. 

Ronald H. Coase, Friedrich A. Hayek, and the Institutional Structure of Production and Exchange

AbstractThe essay investigates the parallels and connections between Friedrich A. Hayek and Ronald H. Coase. It emphasizes the shared context at the London School of Economics (LSE) in the 1930s within which both authors reacted, in particular the role of the so-called LSE tradition on opportunity cost. We focus attention on the same pattern of institutional reaction to the formal similarity proposition of neoclassical general equilibrium theory exposed in both authors. In “The Nature of the Firm” (1937a), Coase’s pioneer transaction cost argument was decisively constructed and shaped by the controversy around the possibility of rational economic calculation under socialism. This debate was crucial to Hayek’s fundamental reformulation of neoclassical equilibrium analysis in terms of a social coordination problem in “Economics and Knowledge” (1937). In a parallel manner, although focused on the microstructure of production, Coase (1937a) was reacting to the standard general equilibrium theory and its postulates. Traditional microeconomic theory could not explain the decisions to make within the firm or to buy in the market, nor the many hybrid organizational arrangements that lie between the centralized firm and the decentralized market process. In “The Problem of Social Cost” (1960), Coase develops his argument advanced in 1937 to the welfare corollaries of the general equilibrium framework encapsulated in the first and second welfare theorems. In this case, the connection was made through the influential ideas of his long-LSE friend, Abba P. Lerner. Finally, the essay explores Hayek’s instrumental role in the intellectual and institutional foundations of the Law and Economics movement at the University of Chicago.

Do Statist Ideology and State-Sponsored Nationalism Intervene in Pakistan’s China Policy? A Neoclassical Realist Perspective

In its relations with China from 1972 to 2018, Pakistan has endeavored to extract and mobilize its domestic resources while conducting a foreign policy of balancing under systemic pressures and power disparities. Statist ideology and state-sponsored nationalism have been both useful and influential in this process. While there is abundant literature on ideology, nationalism, and Pakistan’s foreign policy using theoretical foundations, a neoclassical realist approach has yet to be made. This paper seeks guidance from neoclassical realist theory as explored in the works of Taliaferro (2006) and Schweller (2004). We argue that Pakistan’s ties with China have been facilitated domestically by an Islamic statist ideology and anti-Indian state-sponsored nationalism. These both have facilitated internal balancing through the extraction and mobilization of natural resources and emulation while externally they justified Pakistan’s balancing efforts aimed at countering a perceived Indian threat. The nation’s military and civil elites therefore agree on the necessity of closer ties with China.

Elite Consensus and Balancing: A Neoclassical Realist Perspective on Pakistan–China Ties

Classical realism believes in the primacy of systemic pressures as independent variable and suggests states to choose appropriate balancing policies as dependent variable. However, this complex causal chain requires the role of intervening variables, which the neoclassical realist theory offers. This article employs the neoclassical realist perspective to the unexplored case of Pakistan–China ties from 1972 to 2018 presenting a causal chain that explains elite consensus as the intervening variable between the perceived Indian threat and the preference of Pakistani decision-makers for strong Pakistan–China bond. This article presents the theoretical perspective, perceived Indian threat, the balancing options available to Pakistan and elite typology. We conclude by presenting the contribution of elite consensus in Pakistan’s choice for forging closer ties with China as an appropriate balancing strategy against the perceived Indian threat specifically and external threats in general.

Accessing the Usefulness of Neoclassical Economics Theory

This research shows a review of the Neoclassical Economics theory with a view of discovering or disputing the claim – where possible – that the neoclassical theory is dead and worthless. This paper plagiarizes from the outcome of previous and relevant study conducted on this same proposition and uncovers the existence of a huge controversy in the literature – both old and new – of the effectiveness of the neoclassical economics. Given the lack of consensus on the neoclassical economics debate, the author of this manuscript then shows that while the Neoclassical theory is may not be dead; its effectiveness and efficiency given its entire underlying hypothesis that may be well within doubt. Furthermore the paper found that requesting the death of a model can only occur when the primary assumptions or hypothesis of that model is conducted and still the model fails to deliver valuable results. In the case of the neoclassical economics model; the only criticism can be that the fundamental assumptions nor hypothesis cannot embrace in a real world situation. Therefore declarations of its death cannot stand firm in an authorized argument – its efficiency maybe; but certainly not death. The author does however try to provide a brief assessment of the various extensions and alternatives of the neoclassical model that have evolved in a bid to augment its supposed failings

The African Continental Free Trade Area and informal cross border trade: implications on socio-economic development in Africa

ABSTRACTThe setting up by the African Union of the African Continental Free Trade Area (AfCFTA), which should govern matters relating to, inter alia, trade in goods and services, investment, trade facilitation, intellectual property rights, and competition policy is a step in the right direction. However, this paper argues that the limited inclusion of informal economy actors such as informal cross border traders (ICBTs) appears to undermine the potential of the AfCFTA as the architecture for inclusive socio-economic development in Africa. The paper advances the need for African countries to craft policies which are sensitive to and respond to the circumstances of ordinary people on the ground and not a wholesale application of policies such as neoclassical integration theory, the outcome of which deserts ordinary people. Such policies must be transcendental to the extent of being informed by views from the ground, which does not appear to be the case with the AfCFTA on the score of ICBTs.

Sustainable development in China? A nonparametric decomposition of economic growth

China has undergone significant deviations from the command economy established in 1949, achieving unprecedented success in sustaining high growth. Consequently, numerous scholars have devoted their attention to studying China's economic development. In this study, we contribute to this literature using a new technique to examine China's economic development. This technique utilizes nonparametric directional distance function in the framework of neoclassical growth theory. It avoids the assumptions imposed on parametric production functions that are often short of practical justifications. Our analysis shows that capital and energy inputs account for 75.7% and 20.8% of China's GDP growth during 1985–2020. These figures characterize a capital-driven growth model that is unlikely to be sustainable by conventional wisdom. However, our empirical evidence, obtained through an interactive-fixed effects model, indicates that it is not unreasonable to say that growth in China is government-led rather than capital-driven; the former could be sustained by desirable reforms under strong national leadership while the latter is not.