Newtonian Microeconomics A Dynamic Extension to Neoclassical Micro T
Presenting the dynamic laws of economic quantities, this book tackles one of the core difficulties of current economic theory: that of transforming abstract equations of equilibrium into precise dynamic rules. The theoretical framework of neoclassical mic
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Matti Estola
Newtonian Microeconomics
Matti Estola
Newtonian Microeconomics A Dynamic Extension to Neoclassical Micro Theory
Matti Estola University of Eastern Finland Joensuu, Finland
ISBN 978-3-319-46878-5 DOI 10.1007/978-3-319-46879-2
ISBN 978-3-319-46879-2 (eBook)
Library of Congress Control Number: 2016961252 © The Editor(s) (if applicable) and The Author(s) 2017 This book was advertised with a copyright holder in the name of the publisher in error, whereas the author holds the copyright. This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. Cover illustration: © Carol Dembinsky / Dembinsky Photo Associates / Alamy Stock Photo Printed on acid-free paper This Palgrave Macmillan imprint is published by Springer Nature The registered company is Springer International Publishing AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
Preface
Motivation for the Book The theoretical framework of mainstream microeconomics, neoclassical micro theory, is in many ways restrictive and sticking to it has prohibited the development of economics into a quantitative science. The main weaknesses of neoclassical analysis are: (1) The assumption of static optimization does not allow modeling time dependent processes, such as time dependent price and cost functions of firms and income of consumers. (2) Static profit maximization does not allow increasing returns to scale in firms’ production processes because in that case a profit-maximizing flow of production would not exist. (3) The assumed optimal behavior of economic units prohibits understanding changes in economic quantities, because if every economic unit behaves in the optimal way from its point of view, none will change its behavior and thus observed changes in economies cannot be understood. (4) The static neoclassical theories of a consumer and a firm and their dynamization by dynamic optimization give equal results, if identical target functions are assumed for economic uni
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