Economic viewpoints on ecosystem services
Silvis, H.J. ; Heide, C.M. van der - \ 2013
Wageningen : WOT Natuur & Milieu, Wageningen UR (WOt-rapport 123) - 68
ecosysteemdiensten - economische theorie - economie van natuurlijke hulpbronnen - milieueconomie - ecologie - welvaartseconomie - kosten-batenanalyse - ecosystem services - economic theory - natural resource economics - environmental economics - ecology - welfare economics - cost benefit analysis
to help determine the different values of ecosystems. Ecosystem services are usually divided into four categories: provisioning services, regulating services, cultural services and habitat services (previously denoted as supporting services). This overview highlights economic theories about ecosystem services, distinguishing between pre-classical economics, classical economics, neoclassical economics and modern economics. In addition, specific attention is given to two special branches of economics: (i) natural resource and environmental economics and (ii) ecological economics. Natural resource and environmental economics basically deals with a welfare economics analysis of natural resource and environmental issues, such as pollution control, natural (i.e. renewable and non-renewable) resource exploitation, and global environmental problems such as climate change. The more recent discipline of ecological economics was launched as a new paradigm with closer ties to the natural sciences. Whereas environmental economics focuses on value dimensions (i.e., utility and welfare in theory, and costs and benefits in practice), ecological economics – as a heterodox, non-coherent school of economics – is inclined to add ecological criteria to these dimensions, to cover aspects such as productivity, stability and resilience of ecosystems. Since a proper pricing system for many ecosystem services simply does not exist, various non-market valuation techniques have been developed to elicit the value of these services. Monetary valuation of ecosystem services remains problematic however, for one thing because of the hidden value of the ecosystem structure that supports the different ecosystem services (the ‘glue value’). Finally, the issue of policy analysis and design is addressed. The rationale for regulation with regard to nature and ecosystem services is that adverse risks, such as overexploitation, are not adequately priced in markets. Welfare economics tools for evaluating policies and projects include cost-benefit analysis and cost-effectiveness analysis. From an ecological economics standpoint, multicriteria analysis, the precautionary principle and the method of safe minimum standards are topical issues. The latter two policy tools suggest that we should err on the side of caution in the face of ecological uncertainty. The advancement of knowledge in this field requires further interdisciplinary cooperation between the natural and social sciences. Key words: ecosystem services, history of economic thought, welfare theory, market failures, policy failures, economic valuation, cost-benefit analysis, cost-effectiveness analysis, multicriteria analysis, precautionary principle, safe minimum standards
|Eerlijke economie : Calvijn en het sociaaleconomische leven
Jongeneel, R.A. - \ 2012
Amsterdam : Buijten & Schipperheijn (Verantwoording 30) - ISBN 9789058816702 - 224
christendom - religie - economie - geschiedenis - levensstijl - economische theorie - sociologie - kerk - christianity - religion - economics - history - lifestyle - economic theory - sociology - church
New Insights into the Theory of Giffen Goods
Heijman, W.J.M. ; Mouche, P.H.M. van - \ 2011
Berlin : Springer (Lecture Notes in Economics and Mathematical Systems 655) - ISBN 9783642217760 - 171
economie - bedrijfswetenschap - optimalisatie - micro-economie - economische theorie - economics - management science - optimization - microeconomics - economic theory
One might expect that after their identification in the 19th century, all aspects of Giffen goods would have been studied by now. This appears not to be the case. This book contains the latest insights into the theory of Giffen goods. In the past, surprisingly few goods could be categorized as "Giffen." This may be because of a lack of understanding of the character of these goods. Therefore, the theories explained in this book may also produce a solid basis for further empirical research in the field. Experts throughout the world have contributed to this book, which predominantly pursues a mathematically rigorous approach. It may be used by researchers in the field of fundamental economics and in graduate-level courses in advanced microeconomics.
|Space and economics : An introduction to regional economics
Heijman, W.J.M. ; Schipper, R.A. - \ 2010
Wageningen : Wageningen Academic (Mansholt publication series vol. 7) - ISBN 9789086860975 - 266
regio's - economie - locatietheorie - vestigingsplaats van de productie - geografische verdeling - economische theorie - ruimtelijke evenwichtsanalyse - productie - firma's - europa - regionale economie - regions - economics - location theory - location of production - geographical distribution - economic theory - spatial equilibrium analysis - production - firms - europe - regional economics
The subject area Regional Economics is becoming more and more topical. This means that in economic analyses the production factor 'space' is of increasing importance. This study book aims to integrate space in the area of General Economics in an analytical way. Models and their applications play a major role in the book's approach. The subject of regional economics contains two broad fields. The first is the theory of location, including the basic principles of the economic theory of land use, which has a microeconomic character. The second subject is regional economic development, including spatial equilibrium theory, which is mainly macroeconomic in nature. In the book, both fields will be elaborated in detail. Basic principles of economics are included as background information in order to study the latter advanced subjects addressed in the book. Another important feature of the book is its European character which is rather unique. In fact the majority of the applications here are from Europe. Regional statistical data and maps available in Eurostat have been used abundantly. The spreadsheet programme Excel is used as a convenient tool for the computation of model results. The description of major applications of Excel is included in the book, which makes it self contained.
Policies for agriculture, food and rural areas: does science matter?
Oskam, Arie - \ 2009
agricultural policy - economic theory - agricultural economics - cap - food policy - rural areas - government policy - science
|Workbook Institutional Economics and Economic Organisation Theory; an integrated approach
Slangen, L.H.G. ; Heringa, P.W. - \ 2009
Wageningen : Wageningen Academic Publishers - ISBN 9789086861200 - 176
instellingen - economische theorie - sociaal-economische organisatie - contracten - eigendomsrechten - eigendom - institutionele economie - economische organisatietheorie - institutions - economic theory - socioeconomic organization - contracts - property rights - ownership - institutional economics - economic organization theory
|Institutional economics and economic organisation theory : an integrated approach
Slangen, L.H.G. ; Loucks, L. ; Slangen, A.H.L. - \ 2008
Wageningen : Wageningen Academic Publishers - ISBN 9789086860777 - 431
instellingen - economie - neo-klassieke economie - economische theorie - studieboeken - institutionele economie - economische organisatietheorie - institutions - economics - neoclassical economics - economic theory - textbooks - institutional economics - economic organization theory
This publication presents one of the first attempts to integrate two emerging bodies of economic research: institutional economics and organizational theory. It begins within the framework of neoclassical economics, and then extends the boundaries of this framework to offer answers to questions that have so far remained puzzles in neoclassical economics. The integrated approach of this publication also challenges the dominant paradigm in economics over the last 15 years that views the market as the best mechanism for carrying out transactions. The market is not the only transaction mechanism; other modes of organization are also important. However, this way of thinking does not involve a simple reintroduction of the confrontation between the 'government' and the 'market'. On the contrary, the integrated approach tries to open the 'black box' of the role of institutions in daily life and the diversity of modes of organization. Through this integrated approach, the book hopes to contribute to a better insight to real world problems.
Agriculture and dairy in Eastern Europe after transition focused on Poland and Hungary
Tonini, A. - \ 2007
Wageningen University. Promotor(en): Arie Oskam, co-promotor(en): Roel Jongeneel. - [S.l.] : S.n. - ISBN 9789085045908 - 206
overgangslandbouw - overgangseconomieën - melkveehouderij - centraal-europa - hongarije - polen - landbouw - productiviteit - efficiëntie - micro-economie - economische theorie - melkproductie - prestatieniveau - modellen - transitional farming - transition economies - dairy farming - central europe - hungary - poland - agriculture - productivity - efficiency - performance - microeconomics - economic theory - models - milk production
Keywords: CEECs, Hungary, Poland, dairy, micro economic theory, efficiency, productivity, allocative efficiency, stochastic frontier, profit function, Markov chain, and maximum entropy econometrics.
This thesis analyzes the transition of an economic sector, from a socialist system to a market economy. By using microeconomic theory, available data and elaborated econometric methods, the thesis shows that this joint effort leads to sensible results. The first part deals with sectoral economic analysis for Central Eastern European Countries (CEECs) that signed agreement for the European Union (EU) accession in 1998. The second part is focused on two countries (Poland and Hungary) and the dairy sector. Analytical methods used are: stochastic frontier, distance function, profit function, and Markov chain. The data were sourced from Eurostat, FAO, OECD and national statistical offices. The observations related to the former socialist regime were discarded removing the possibility of relying on traditional estimation techniques. Easier applicability was exchanged for more relevance. Maximum Entropy, which is a non-conventional estimation technique suitable for dealing with "ill-posed", and/or "ill-conditioned" problems, was largely used. By reconciling sample information and non-sample information in a rigorous and transparent manner this thesis sought to make the best estimates possible from the available information. Results of the first part indicate that despite the decrease in output, total factor productivity growth rates were positive across all CEECs analysed during the post socialist period. Countries which during the socialist regime were characterised by large-scale operators were more technologically efficient compared with the other countries analysed. This supports the view that large-scale farming performs better than small-scale farming in the period following transition when there were missing markets and uncertain economic conditions. The agricultural output mix was largely influenced by transition. Results indicate that it is going to be difficult to increase chicken meat getting rid of the other agricultural products. Adjustment costs were greater and increasing over time for Hungary as compared to Poland. The mode! detected overspecialization for sugar beet production. In the second half of the 1990s the degree of complementarity and substitutability is increased.
Second the thesis analyzed the primary dairy production of Hungary and Poland modelling their dairy and beef supplies as well as their dairy farm structures. The developed supply model showed an original and empirically based way for satisfying theoretical consistency as well as plausibility. Final supply elasticities estimates were not so different from those found for EU-15 countries in the pre-quota period. This confirms that dairy operations rely on a similar production technology and that the calibrated elasticities used in the literature are not far from reality. The dairy farm size projections showed that the number of dairy farms will continue to decline in the coming decade, although with an increase in the number of farms of medium and large size. The exit from the sector of the subsistence dairy farms is predicted to proceed more slowly in Poland than in Hungary. The findings suggest a convergence to a dairy farm structure similar to the one encountered in the former EU-15 members with a predominance of medium size farms. The degree of convergence will largely depend on the mediating role of a we!l-defmed and functioning land market.
Heterodox views on economics and the economy of the global society
Meijer, G. ; Heijman, W.J.M. ; Ophem, J.A.C. van; Verstegen, B.H.J. - \ 2006
Wageningen : Wageningen Academic Publishers (Mansholt publication series vol. 1) - ISBN 9789076998961 - 399
economie - samenleving - sociale wetenschappen - interdisciplinair onderzoek - economische theorie - milieu - internationale betrekkingen - economics - society - social sciences - interdisciplinary research - economic theory - environment - international relations
The allocation of scarce resources in miscellaneous cases
Hamsvoort, C.P.C.M. van der - \ 2006
Wageningen University. Promotor(en): Henk Folmer; L.C. Zachariasse. - [S.l. ] : S.n. - ISBN 9789086150526 - 126
middelentoewijzing - hulpbronnen - economische theorie - duurzaamheid (sustainability) - veilingen - landbouwgrond - grondmarkten - handelsonderhandelingen - milieu - landgebruiksplanning - schaarste - resource allocation - resources - economic theory - sustainability - auctions - agricultural land - land markets - trade negotiations - environment - land use planning - scarcity
Key words: sustainable development, environmental utilization space (EUS), auctions, conservation contracting, information asymmetry, agricultural land market, Town and Country Planning Act,AMS, agricultural trade negotiations, PSE. This book presents a number of papers that address different allocation problems. Each of them applies to specific situations, defined by the conditions assumed in the model. The papers appeared previously in different outlets and are reprinted by permission of the co-authors and publishers.
The first paper - 'Sustainability: a review of the debate and an extension'- argues that the current debate on sustainability is obscured by a number of misunderstandings. These relate, first, to the ongoing dispute between ecologists and economists holding different visions about the limits of economic growth and the carrying capacity of the Earth; and second, to the discrepancy between theoretical sustainability and practical sustainability. The paper concludes that the current vagueness surrounding sustainability may be reduced by reframing the debate. It demonstrates that the dispute between ecologists and economists can largely be considered as unproductive because the only sustainability concept supported by theory is that of 'strong sustainability'. The paper argues further that the gap between theoretical and practical sustainability may be bridged by distinguishing three concepts which properly account for informational inadequacies and human preferences in the design of sustainability constraints. These are: the 'sustainable EUS' (Environmental Utilization Space), the 'measured EUS', and the 'chosen EUS'.
In the second paper - 'Auctioning conservation contracts: a theoretical analysis and an application' - Auction theory is used to analyze the potential benefits of auctions in allocating contracts for the provision of nonmarket goods in the countryside. A model of optimal bidding for conservation contracts is developed and applied to a hypothetical conservation programme. The study shows that competitive bidding, compared to fixed‑rate payments, can increase the cost effectiveness of conservation contracting significantly. The cost revelation mechanism inherent in the bidding process makes auctions a powerful means by which to reduce the problems of information asymmetry. The study also shows that strategic bidding behaviour, which may adversely affect the performance of sequential auctions, is difficult to address by means of auction design.
The third paper - 'Auctions as a means of creating a market for public goods from agriculture' - looks at the possibility of creating a market for environmental goods and services in the countryside by awarding conservation contracts to farmers on the basis of competitive bidding. Auctions have several theoretical advantages over alternative allocation mechanisms (such as standard‑rate payments) because they allow the participants to deal with informational asymmetries and the uncertainty about the value of the (nonmarket) goods being traded. A formal model of bidding behaviour in 'green auctions' shows that bidding strategies are determined by the individual farmers' costs of implementing the conservation contracts and their beliefs about the maximum acceptable payment level, making the auction an imperfect cost revelation mechanism. Auctions can reduce the information rents accruing to farmers and can increase the cost‑effectiveness of public goods provision. Strategic bidding behaviour in multiple‑signup auctions as well as high transaction costs are potential sources of reduced efficiency.
The fourth paper - 'The pivotal role of the agricultural land market in the Netherlands' -analyzes the allocation of space in the Netherlands. In particular the effect of the 'Town and Country Planning Act', government policies in respect of agriculture, nature, landscape, and the environment and developments in agricultural and non-agricultural sectors on the allocation and price of agricultural land. The study shows that viewed separately, the environmental, nature, and agricultural policies might be consistent with the goals they are supposed to achieve, but in interaction they are conflicting and preclude the simultaneous achievement of these very same objectives. The study also shows that the agricultural land market plays a pivotal role in this network of interactions. The EU market and price policy, with the exception of the milk quotas, caused the price of land to rise, and subsequently the land price rose again due to the environmental and nature policy needed to compensate for the negative effects of that agricultural policy. In addition, the economic boom of the late '90s created a great many 'red' claims on agricultural land, which in combination with an unsteady 'Town and Country Planning Act', drives up land prices along with the general increase in real estate prices. For farmers, the resulting extremely high land price was reason to make even more intensive use of land.Finally, the fifth paper - 'The AMS in agricultural trade negotiations: a review' - reviews the role of the Aggregate Measure of Support (AMS) in the agricultural trade negotiations of the Uruguay Round. Contrary to expectations at the start of these negotiations, the AMS only occupies a subsidiary position in the final agreement. In order to explain this, first an economic analysis is presented of the Producer Subsidy Equivalent (PSE), the basic AMS concept in the GATT discussions. Secondly, the political AMS debate is described and analyzed, using information from unpublished GATT documents. Although the PSE concept is based on simple assumptions, its measurement already meets a number of difficult problems (policy coverage, product coverage, external references prices, currency). Once these are solved, the concept may offer a brief insight into actual governmental support in agriculture. However, the calculations do not provide a sound measure of the trade distortions caused by agricultural policies. Mainly for that reason, the idea of a pure aggregated approach - based on the AMS - proved unsuccessful in the negotiations. Instead, the Contracting Parties accepted the framework of making binding agreements on three separate areas: internal support, market access and export support. While important and very specific commitments were made in the areas of agricultural imports and exports, the AMS has only found application in the internal support area.
|Consumentengedrag Een economische benadering
Heijman, W.J.M. ; Dietz, F.J. ; Antonides, G. - \ 2005
Utrecht/Zutphen : ThiemeMeulenhoff (Essentials ) - ISBN 9789006952025 - 168
consumentengedrag - economie - economisch gedrag - besluitvorming - economische theorie - studieboeken - economische aspecten - consumer behaviour - economics - economic behaviour - decision making - economic theory - textbooks - economic aspects
Het boek "Consumentengedrag" gaat in op de theoretische zienswijzen van de consument en behandelt de invloed van inkomens, prijzen en context op consumentengedrag. "Consumentengedrag" is een praktische uitgave die de student op toegankelijke wijze de belangrijkste economische aspecten van consumentengedrag bijbrengt.
Marktwerking : een zevenstappenplan voor marktwerking in landbouw, natuurbeheer en voedselkwaliteit
Bunte, F.H.J. - \ 2004
Den Haag : LEI (Rapport / LEI : Domein 6, Beleid ) - ISBN 9789052429021 - 46
landbouwbeleid - marktconcurrentie - evaluatie - landbouwsector - natuurbescherming - voedselkwaliteit - economische theorie - markteconomie - nederland - agricultural policy - market competition - evaluation - agricultural sector - nature conservation - food quality - economic theory - market economics - netherlands
Deze rapportage bevat een stappenplan voor marktwerkingsvraagstukken, toegespitst op het werkterrein van het Ministerie van LNV. Het stappenplan heeft het karakter van een beleidsevaluatie. In essentie wordt er één vraag beantwoord: zijn er verbeteringen mogelijk in de relatie tussen beleidsdoelstelling, beleidsinstrumentarium en resultaat? Uitgangspunt van de economische analyse in het rapport is dat de overheid voor markten doelstellingen formuleert, indien markten niet presteren zoals maatschappij en overheid willen, dat wil zeggen als markten falen. Voor deze situaties weegt het stappenplan de rol van overheid tegen die van de markt af.
|Tussen principaal en agent draait het om de consument
Kuiper, W.E. - \ 2004
Tijdschrift voor sociaalwetenschappelijk onderzoek van de landbouw 19 (2004)3. - ISSN 0921-481X - p. 155 - 167.
agrarische economie - marketing - boeren - aardappelen - consumentenvoorkeuren - economische theorie - ketenmanagement - agricultural economics - farmers - potatoes - consumer preferences - economic theory - supply chain management
In dit artikel wordt ketenomkering in verband gebracht met aardappeltelers die, als agent in het klassieke model van principaal en agent, van de handel en industrie als principaal en tevens afnemers van hun aardappelen een steeds hoger percentage van de detailhandelsomzet krijgen aangeboden als dividend voor het risicodragend kapitaal, dat de aardappeltelers aan handel en industrie verstrekken ter investering in de ontwikkeling van producten die beter aansluiten op de wensen van de consument
|The Laffer Curve Revisited
Heijman, W.J.M. ; Ophem, J.A.C. van - \ 2003
In: Economic Policy in an Orderly Framework / Backhaus,, J.G., Heijman, W.J.M., Nentjes, A., van Ophem, J.A.C., Münster : LIT Verlag Münster (Wirtschaft Forschung und Wissenschaft Band 5) - ISBN 9783825871840 - p. 201 - 211.
economische theorie - belastingen - informele sector - fiscaal beleid - oeso-landen - economic theory - taxes - informal sector - fiscal policy - oecd countries
|Economic Policy in an Orderly Framework
Backhaus, J.G. ; Heijman, W.J.M. ; Nentjes, A. ; Ophem, J.A.C. van - \ 2003
Münster : Lit Verlag (Wirtschaft : Forschung und Wissenschaft Bd. 5) - ISBN 9783825871840 - 482
economisch beleid - economische theorie - economische orde - politieke economie - economic policy - economic theory - economic order - political economy
Economische wetenschap als politieke muze : filosofische reflecties op de relevantie van economische wetenschap voor ecologisch beleid
Deblonde, M.K. - \ 2001
Wageningen University. Promotor(en): M. Korthals; H.G.J. Gremmen; J. van der Straaten. - S.l. : S.n. - ISBN 9789048158881 - 291
ecologie - overheidsbeleid - economische theorie - economie - duurzaamheid (sustainability) - invloeden - ecology - sustainability - government policy - economic theory - economics - influences
The first part of this book - consisting of chapters 2, 3 and 4 - is a philosophical exploration of the characteristics of an economics that intends to be relevant for the problem of sustainability. In chapter 2, 1 will analyse economic and political theories as conceptual constructs referring to the economic and political sphere respectively. I will argue that such conceptual constructs inevitably are value-laden and that, hence, different conceptual constructs of the same sphere can exist. I will argue, moreover, that and why it is important to distinguish between the economic and the political sphere. I will derive the latter arguments from a confrontation between Buchanan's and Arendt's political theory.
In chapter 3, 1 will discuss an economy as consisting of two dimensions, a symbolic or institutional one and an ecological one. Such interpretation will allow us to understand the ecological performance of an economy as the counterpart of its institutional organisation. I will further argue that, in order to get insights into the internal relationships between an economy and its ecological performance, we need insights into the institutional whole of an economy. And I will elaborate on what I mean by "an institutional whole". I will suggest that it is a matter of conceptually analysing different types of economic institutions and different hierarchies of institutions. Chapter 3 will thus offer us some substantive norms for an economics that aims at contributing successfully to the political objective of "sustainability".
In chapter 4, 1 will derive four norms for the nature, rather than the content, of a politically successful economics. I will suggest that a politically successful economics should, to start with, be objective in the sense that it should aim at intersubjective consensus among economists. Objectivity as intersubjective consensus does, however, not imply neutrality. I will suggest, further, that economics should provide economic policy with insights, rather than instruments. This means that economics should aim at (non-neutral) description and explanation, not at (non-neutral) prescription and prediction. I will assert, finally, that economics should be rather impartial than partial. It should explain economic sources of political inequality and contribute to political freedom. Both Arendt's interpretation of politics as a deliberative democracy and Weber's and Neurath's philosophical reflections on the nature of the social sciences will function as the breeding ground for these norms.
In the second part of this book, i.e., chapters 5, 6, 7 and 8, 1 will confront the norms developed concerning both the content and the nature of an ecologically successful economics with the writings of David Pearce and Daniel Bromley. Chapters 5 and 7 are a substantive reconstruction of Pearce's and Bromley's theoretical work respectively, Chapters 6 and 8 are an analysis of the nature of their economics. Chapters 5 and 7 will make clear to what extent their writings comply with the substantive norm 1 propose in chapter 3. Chapters 6 and 8 will illuminate to what extent their writings meet the four norms suggested , in chapter 4, for the nature of an ecologically successful economics.
Part 1 and 11 will be closed by chapter 9, in which 1 will give an overview of the main conclusions of this research project.
A Great Revolution in Economics - Vienna 1871 and after
Leen, A.R. ; Houmanidis, L.T. - \ 2001
Wageningen : Cereales - ISBN 9789080572430 - 192
economie - economische theorie - consumenten - consumentengedrag - markteconomie - marktconcurrentie - neo-klassieke economie - waardetheorie - geschiedenis - economics - economic theory - consumers - consumer behaviour - market economics - market competition - neoclassical economics - value theory - history
This book contains a comprehensive perspective on both older and modern Austrian economics. The first part especially describes the older Austrian School of Economics emphasizing both its subjective feature and its theoretical feature. Both features are extensively discussed from a non-Austrian perspective. The second part, in general, describes modern Austrian economics as an extension of Menger's older static subjectivism: a consequent dynamic subjectivism. In particular it examines the question of what the calculative and entrepreneurial consumer looks like in the market process. It also gives an extensive overview of the method of Austrian economics: praxeology.
Heijman, W.J.M. - \ 2000
Wageningen : Cereales - ISBN 9789080572416 - 123
macro-economie - economische theorie - toepassingen - computer software - handboeken - begrippen - macroeconomics - economic theory - applications - computer software - handbooks - concepts
This book contains a course in applied macroeconomics. Macroeconomic theory is applied to real world cases. Students are expected to compute model results with the help of a spreadsheet program. To that end the book also contains descriptions of the spreadsheet applications used, such as linear regression and matrix manipulations. Especially second year students of economics with knowledge of basic theory will benefit from this approach.
The consumer in Austrian economics and the Austrian perspective on consumer policy
Leen, A.R. - \ 1999
Agricultural University. Promotor(en): H. Folmer; W.J.M. Heijman. - S.l. : S.n. - ISBN 9789058081025 - 223
economie - economische theorie - methodologie - economische analyse - welvaartseconomie - neo-klassieke economie - markteconomie - marktconcurrentie - consumenten - beleid - overheidsbeleid - kapitalisme - productaansprakelijkheid - economics - economic theory - methodology - economic analysis - welfare economics - neoclassical economics - market economics - market competition - consumers - policy - government policy - capitalism - product liability
In this thesis I examined the place of the competitive-entrepreneurial consumer in Austrian economic thought. For a neoclassical economist, competition among consumers is hard to find. For an Austrian economist, however, it is a necessity. The introduction puts forward the problem that although an Austrian economist believes that everyone -the consumer included- acts entrepreneurially, in his elucidation of the market process he gives the role of entrepreneur to the producer only.
In Part I, "The Consumer in Austrian Economics" I looked at the questions (1) What is Austrian economics? (2) What is the Austrian methodology? and (3) What about the consumer in Austrian economics? The first chapter explains the name Austrian. Although it indeed began in Austria, today it has nothing to do with that country. The term Austrian means a way of looking at the subject and the method of economic science. The perfectly-competitive model of mainstream economics is replaced by the notion of the entrepreneurial-competitive market process. The second chapter looks at the method of Austrian economics: praxeology. It is the verbal elaboration of the logical implication that men act. The title of Mises's book "Human Action" sums it up. Purposes direct all conscious human action. Every human act exchanges something possessed for something preferred. All human action attempts to change the future. The chapter examines what this means for the Austrian perspective on some basic economic notions of human action and non-action (valuation and indifference curves), and economic laws (the law of decreasing returns). Economists use their minds to deduce conclusions; experience in human action is history and only history. There is a sharp difference between Austrian and mainstream neoclassical economics; the latter is often mathematically moulded and econometrically tested, the former never.
Chapter Three looks at the reason why the consumer is missing from Austrian economics. By emphasizing the importance of (often hidden) dispersed knowledge and the feasibility of the producer being able to calculate -as against a government's ability to calculate and collect all the necessary data- the consumer got lost. This all took place in the so-called socialist-calculation debate that raged between the two world wars. The consumer was never to be found again in Austrian economics. He is absent in the elucidation of the market as a dynamic process of entrepreneurial discovery, as well as, in the analysis of the possibility of economic calculation in monetary terms. The latter is discussed only in terms of production, and in the former modern Austrian economics uses the methodological makeshift of an entrepreneurial producer and a non-entrepreneurial consumer. Just like the classical economists before them, the Austrians neglect the rationality of the consumer.
In Part II, "The Consumer: Entrepreneurial and Calculative", I examined the question "What does the calculative and entrepreneurial consumer look like?" I have attempted to recompose market phenomena in terms of the typical components of everyday decision making. This is done for the ordinary businessman, as well as for the average consumer. Chapter Four discusses a lesser-known theme of the Austrians. Menger in his Grundzätze , gave four characteristics of goods as answer to the question of what makes something a good. Böhm-Bawerk in his Rechte und Verhältnisse added a fifth: individuals should also know how to use a thing. I used this fifth characteristic to throw light on the consumer: his form of alertness and entrepreneurship inside the market process. With the help of Ryle, I looked at a notion of alertness that suits the producer and at one that suits the consumer. Alertness is a form of knowing-how that can be differentiated for the producer as a capacity (competence) and for the consumer as a tendency (proneness). According to Ryle, although both can be simulated, we use the abusive word 'charlatan' for the fraud who pretends to be able to bring things off, and the abusive word 'hypocrite' for the one who effects motives and habits.
Chapter Five draws on the work of Schönfeld-Illy. Kirzner distinguishes maximization inside a given ends-means framework from the determination of the framework. The Robbinsian maximizer can perform only the first role. Mises's homo agens can do both. In Kirzner's methodological makeshift, the consumer acts as a pure Robbinsian maximizer. However, inside a Robbinsian framework of given ends and means, the consumer needs the same element of alertness that Kirzner locates in the determination of the framework. The consumer avoids the problem of the immeasurability of utility and shortens the calculation process with the help of three principles. The first is the separate utility of a good. Though the consumer's aim is to reach the greatest utility, he does not and cannot calculate total utility as such, but only the changes in total utility, changes brought about by adding goods to the ones already used. These changes give the total utility of each good separately. The second principle is quid pro quo. Changes in total utility do not give the consumer numbers in which he can calculate. What he can do is compare the changes with other changes. The third is economic relevance. The price relevant for the marginal part has an economic relevance for all other units of the stock of goods. These three principles form the basis of Schönfeld-Illy's theory on the role of prices (that is alertness) in the calculation process of the consumer.
Chapter Six expands on the calculation process of the consumer addressing the question of how the maximizing process of the consumer can be described from a subjective point of view, that is in terms of the components of everyday decision-making. The mathematical mould of neoclassical theory means that for the neoclassical the problem is a mathematical one: the solving of a Lagrangean function. From a theoretical point of view, a consumer has a lot of work to do in computing the marginal utilities. First, he has to line up all the alternative combinations of goods available, then he has to assess the needs successive units of the various goods can satisfy, and finally he has to find out at what point in the row of units satisfaction breaks off. It is impossible, however, to make all the necessary calculations. In reality the consumer has to take a short-cut. The notion of taking a short-cut can be formalized inside the neo-classical model by focusing on the notion of marginal utility: the way it functions in equilibrium and disequilibrium. Saving and consumption patterns are explained for two groups of consumers: (1) the well-established consumers, the ones we know from traditional economic theory, and (2) the trendsetting consumers, who are in disequilibrium by choice. The latter are either short-sighted or far-sighted.
Chapter Seven looks at the notion of marginal utility to answer the question of how a consumer calculates the total value of a divisible amount of goods. Wieser's Multiplicationstheorem des Wertes says that to get the total value, all units of a stock of good have to be multiplied by the attained marginal utility. Böhm-Bawerk's Integrationstheorem des Wertes says that the total value of a stock of goods is the sum of the utilities of the different units. Because Wieser underestimated the total utility of a stock of goods, his formulation found few followers. Schönfeld-Illy's interpretation of marginal utility, that of the economic relevance of a margin for the whole, gives an answer as to why Wieser's description could be true. Schönfeld-Illy solves an inconsistency in the thinking of Wieser, who took the description of marginal utility from the situation in which the calculation was already completed. However, he draws the description of the function of marginal utility from the situation in which calculation begins. Schönfeld-Illy wonders whether the last stage of calculation contains all the things used during the actual calculation process and, that consequently are contained in a conceptual description grafted upon the final stage.
In Part III, "The Austrian Perspective on Consumer Policy", I looked at consumer policy in general, and advertising (the way it functions and can be used to introduce a new product) and products liability (from a neoclassical and Austrian perspective) in particular. Chapter Eight introduces the notion of consumer policy and its link with creativity and entrepreneurship. It especially addresses the question of how the Austrian vision on the market process relates to consumer policy. In other words, what the impact of consumer policy is upon the perception by consumers and producers of the available array of opportunities. To describe the ways consumer policy hampers discovery I used Kirzner's four notions of the undiscovered, the unsimulated, the stifled, and the wholly superfluous discovery process. I concluded that the Austrian notion of the market provides a novel angle for a critique of the regulated consumer. Regulatory restrictions interfere with the spontaneous discovery process the unregulated market tends to generate. Consumer policy stifles the incentive that converts a socially desirable opportunity (an opportunity that transcends an existing framework of perceived opportunities) into a personally gainful one.
Chapter Nine demonstrates that there is room for the praxeological method in economics. Empirical facts cannot discriminate between two opposing hypotheses on advertising. (1) Advertising is partly deceptive and partly manipulative. Without government regulation this situation will continue. (2) Advertising is a good like any other good. The consumer gets the type and quality of advertising he wants and is willing to pay for. Advertising is an essential part of the competition process, making the product known to the consumers. Consumers are not passive actors but by-and-large act in their own self-interest. Chapter Ten expands on advertising by looking at pricing a real novelty. Competition among consumers can be used to spread the news. Where trends are conceived consumers compete, creating the market for the producer. Trends are not sold by competing producers but are bought by competing consumers.
Chapters Eleven and Twelve look at products liability (that is harms arising from commercial products) from the mainstream neoclassical point of view and from the Austrian one respectively. For a neoclassical, costs are objective and are known to the judge, who, by using the so-called Hand Formula, balances expected accident costs against the cost of making the product safer. A defendant is guilty of negligence if P times L is greater than B. Where P is the probability, a loss will occur, L is the value associated with the loss, and B the cost associated with preventing it. For an Austrian, however, since costs are subjective and knowledge cannot be centralized, contract law seems to be the best. In other words, it is the old rule of caveat emptor, "Let the buyer and seller beware". The parties can then arrange the expected costs and benefits beforehand from their own subjective point of view and entrepreneurial insights. The utter stranger (who is no partner in the exchange) whose property rights are violated -there are so-called negative externalities- can claim compensation. The amount of compensation is for the judge on ethical grounds, and not the economist, to decide.On the basis of the first three parts of this thesis, what have neoclassicals and Austrians to say to each other? What is the outcome on the consumer in Austrian economics and the Austrian perspective on consumer policy (cp. Kirzner, 1997, and De Soto, 1998, pp. 78-79)?
The methodological analysis in Part I shows that neoclassicals and Austrians do not have much to say to each other. Theories that do not need testing and are always true are out of the question in the standard neoclassical methodology of empirical falsification. Verbal logic, aprioristic-deductive reasoning leaves room for subjectivism and entrepreneurship, both of which the market process depends on. In other words, the claim of the Austrians that prediction is impossible -because what happens depends on knowledge yet to be created in an entrepreneurial process (to find out things we are not even aware of that we don not know them: to correct genuine errors)- stands against quantitative prediction as a sought and known objective of the neoclassical. The analysis of consumer behavior in Part II shows that neoclassicals and Austrians do not have to say much to each other. For an Austrian, the consumer is a creative entrepreneur who stands in the midst of a dynamic process. For a neoclassical, he is a homo economics who makes rational choices based on constraint maximization in a given and known ends-means relation.
The analysis of consumer policy in Part III shows that neoclassicals and Austrians do not have to say much to each other. For an Austrian, the knowledge the government should act on is subjective, dispersed, and changes all the time. Objective scientific knowledge alone is not enough; there is also the practical and purely subjective knowledge of place and time. For an Austrian, the government's role is to protect the property rights of the individual. If his property rights are involved, the judge decides on ethical grounds; economics is not involved. For a neoclassical, however, there is a complete knowledge of means and ends, though decorated with known uncertainty. Costs are objective and can be measured by a third party.
But is there nothing positive to be said about the neoclassical-Austrian connection? The Austrian revolution was and still is part of a larger tradition (see Chapter 1). It not only started in the 1870s with Menger, but with Jevons and Walras too. All three wanted to theorize. All three wanted to explain market regularities as the outcome of the rational choices of individuals subject to constraints. All endorsed the existence of economic laws showing systematic consequences to our actions. For Mises the notion of economic law is not only the core of classical economics but of neoclassical economics too. All neoclassicals want to explain the undesigned regularities of the market order as the outcome of the meaningful choices of individuals. Therefore Austrians are still part of the economic orthodoxy of neoclassical economics, although they are no longer part of the mainstream Walrasian and Marshallian branch. In other words, to a certain extent we can say that the language differs: formalistic precision in mainstream neoclassical versus verbal elaboration in Austrian economics. The latter reinforces most of the former's conclusions. I would argue that it is partly a difference in methodology: a different road is taken to reach the same conclusions (see for instance the law of decreasing returns in Part I). Of course, an Austrian would say that it is not only the language that differs, but the problem situation too. For him, subjective assessment and entrepreneurship are part of the richness of the empirical world. Both, however, crowd out formalism with its implied form of narrow rationalism and supposition of full availability of information, whether deterministic or probabilistic. Subjectivism and entrepreneurship cannot be analyzed with formal tools without transforming their essence. Simplification has its price.
Therefore, what the neoclassical can learn from the Austrian is that there is more in the world of the theoretical economist than only the economics of perfect competition. There is the competitive-entrepreneurial process of discovery (see Part I). A neoclassical tends to underestimate the learning capacity of individuals (see Part II), while, at the same time, overestimating the economic knowledge of the government. Negative externalities for instance are part of ethics not economics (see our Part III). Nevertheless, a neoclassical economist would counter this by saying that although what an Austrian says on subjectivism and entrepreneurship is very interesting, unless it is stated in formal proof it remains just that -an interesting idea and no more.
Applied welfare analysis (see Part III), however, unlike theoretical economics does not belong to a field where the Austrian and mainstream economist meet all that easily. For the Austrian, if subjective value and the open-ended market process are taken seriously, individual rankings cannot be fused together, and there is no end-state to mimic. There is no norm (taken from a pattern of imagined omniscience) for assessing policies. For the Austrian since sheer ignorance is not incorporated, mainstream welfare economics has no place for those acts of entrepreneurship the equilibrative discovery process depends on. Not only allocative efficiency but speed and accuracy with which the economy identifies and overcomes waste and discoordination are important too. However, compared to more heterodox forms of economics, Austrians and neoclassicals share the importance both give to laissez faire . The Austrian belief in it, compared to mainstream neoclassical economics, is strong. This study's emphasis on subjectivism and entrepreneurship reinforces this belief. The tendency towards greater awareness that leads to equilibrium is fuelled by producers as well as consumers (see Part II). Profit opportunities provide the incentive for both. There is a tendency for entrepreneurial errors to be corrected -not to be made. There is a tendency to be right. There is more to gain from greater awareness than from diminishing awareness; a tendency a changing government policy often frustrates. A certain environment of stability is necessary to overwhelm the forces of disequilibrium.
In other words, Austrian economics reinforces the mainstream belief in a spontaneous equilibrium. Not to the extreme of there always being an equilibrium, but certainly more than there never being an equilibrium. The consumer corrects errors too. Since the consumer is no producer, the Kirznerian notion of entrepreneurship as something correcting an already existing situation waiting to be discovered, fits him. He too gets his "profit" for overcoming ignorance through alertness.
If the just-said is true, the biggest problem for the Austrians is not that their theory is unrealistic or irrelevant, that it gives an inaccurate description of the social world or misunderstands the forces at work. No, their biggest problem is to explain why economists disagree. If theorizing is based on apodictally true premises, only to be stated to be seen as true, the rest being pure deduction, why do not all economists -including the neoclassicals- agree? But even Austrians differ. This is one problem the neoclassicals and Austrians share. As the former emphasize prediction and the latter verbal logic, both have questions to answer. The neoclassical has to explain why if he is so clever in making predictions, he is not rich. And the Austrian has to show why, someone so clever at making deductions does not have all economists agreeing with him.
Finally, is there really no point where Austrians and neoclassicals fully meet as far as the consumer goes? Yes there is. If the neoclassical is right, it follows that with the appropriate policy, consumers can be satisfied. Full knowledge excludes errors in buying: the consumer's nirvana. However, if the Austrian is right, this would mean the end of human action (and economics). The basic premise of the Austrians is "man act". We act if we are dissatisfied; when satisfied, action stops. "Some people sometimes say that they would like to know [...] what the prices are going to be in the stock market next weak. Actually, we do not want to know the future. If you, or I, or anyone could know the future, this would mean it was set and we could no longer act to change it. All human activity is an attempt to change the future. [...] if we had everything we wanted, there would be no reason to live. When the day comes that you have everything you want, let me know, I shall make arrangements to come to your funeral, because you will be dead" (Greaves, 1984, p. 6).
A perfect public policy would therefore solve the problem of the consumer for both neoclassical and Austrian. Either he would be in the consumer's nirvana or be vegetating in a state of non-action like a plant. Which does not make much of a difference: in both cases he would be dead.
We are back at the essence of Austrian economics I began with: the subjectivistic character of choice. For a neoclassical, a fully informed and satisfied consumer is possible. For an Austrian, since choice is essentially purposeful and entrepreneurial, it is an impossibility. Human choices, if real (that is inherently creative) could have been different and have different effects. A situation of full knowledge, a given framework of ends and means, excludes. "[I]ndividual choice," says Kirzner, "is always made with one's antennae alertly switched on to notice opportunities (that already 'exist', or that may be created) worth pursuing even through the mists of an uncertain future" (1982, p. 21).
|The concept of potential Pareto improvement revisited
Jongeneel, R. ; Koning, N.B.J. - \ 1999
Tijdschrift voor sociaalwetenschappelijk onderzoek van de landbouw 14 (1999)3. - ISSN 0921-481X - p. 114 - 126.
economische analyse - welvaartseconomie - sociaal welzijn - macro-economie - economische theorie - efficiëntie - economic analysis - welfare economics - social welfare - macroeconomics - economic theory - efficiency