On The Reappraisal Of Microeconomics

‘This book seeks to reformulate traditional neoclassical microeconomic theory into a new paradigm that integrates an alternative rationality postulate, expectations, resource stocks, disequilibrium, dynamics, and endogenous technological change. This is a noble pursuit, since mainstream micro theory has not done a good job of addressing most of these considerations individually, let alone as a group. The book is a significant contribution to the literature and could even become a “breakthrough” work.’
– Adam Rose, Pennsylvania State University, US

‘This is an excellent book. It will be a welcome addition to the growing body of work expanding the field of economic theory. The future of economics lies in work like this developing a kind of economics consistent with real human behaviour and biophysical reality.’
– John M. Gowdy, Rensselaer Polytechnic Institute, US

The conventional utility-based approach to microeconomics is now nearly a century old and although frequently criticised, it has yet to be replaced. On the Reappraisal of Microeconomics offers an alternative approach that overcomes most of the objections to orthodox theory, whilst offering some unique additional advantages.

The authors present a new approach to non-equilibrium microeconomics that applies equally to production, trade and consumption, and that is also consistent with the laws of thermodynamics. This new theory is not limited to equilibrium or near-equilibrium conditions. The core of the theory is proof that, for each agent (firm or individual), there exists an unique function of goods and money (denoted Z) that can be interpreted as subjective wealth for an individual or the owners of a firm. Exchanges may occur only when both parties enjoy an increase in subjective wealth as a consequence. On average, this Z-function will increase over time if, and only if, the agent obeys a simple decision rule in all economic transactions: namely to ‘avoid avoidable losses’, or AAL, it being understood that some losses are unavoidable. Dynamic equations describing growth (or decline) can be derived simply by calculating time derivatives of a wealth function, without the need for constrained maximization of an integral of utility (or some surrogate) BM_1_over time. The Z-function also has a number of other interesting properties that can be used for multi-agent and multi-sectoral simulation models to explore a variety of economic situations that cannot be addressed so easily using conventional methods.

This is a stimulating, provocative and highly original book that will appeal to informed academics, researchers and other professionals with an interest in the fundamentals of neoclassical economics and its applications to business, finance, growth and the environment.