Elements of Neo-Walrasian Economics: A Survey (Advances in Japanese Business and Economics Book 5)

This book aims to explain to the readers the basic idea of the general equilibrium theory, which forms the core of the current mainstream economics called neoclassical school. To understand this theory is absolutely necessary, either to study further or to criticize the contemporary economic theories. The author not only explains traditional theories, but also makes clear the many problems which are still unsolved. As a text book or reference book for those students who are studying microeconomics for the first time, the author recommends the use of Chapter 1, Chapter 2 (except section 9), Chapter 3 (from section 1 to section 3, section 6, section 11), Chapter 4 (from section 1 to section 4), Chapter 5 (from section 1 to section 5, section 8), Chapter 6 (except sections 6 and 7), Chapter 7 (from section 1 to section 5), Chapter 8 (from section 1 to section 6) and Chapter 9 (sections 1, 4 and 7). For more advanced readers, the author recommends the remaining sections and the literature recommended in the last part of each chapter. Problems given at the end of each chapter allow readers to confirm understanding of the content of the chapter and suggest to the readers more advanced studies. Incidentally, the author tried to avoid the use of the advanced mathematics. Only elementary knowledge of differential calculus and linear algebra are required to read this book. Preface 8 Contents 10 Chapter 1: Introduction 13 1.1 Economic Theory 13 1.2 Classical Economics 14 1.3 Marginal Revolution and After 16 1.4 Anti-Orthodox Economics (1) 17 1.5 Anti-Orthodox Economics (2) 19 Problems 19 Literature 20 Chapter 2: Firms and Production 21 2.1 The Theory of the Firm 21 2.2 Production Functions 22 2.3 Feasible Set 24 2.4 Linear Programming Model 27 2.5 Convexity of Feasible Set 29 2.6 Marginal Cost 29 2.7 Average Cost 31 2.8 Marshallian Externality 33 2.9 Profit Function 34 2.10 Supply and Demand Function 36 Problems 38 Literature 39 Chapter 3: Households and Consumption 40 3.1 The Theory of the Consumer 40 3.2 Utility Function 41 3.3 Indifference Map 43 3.4 Linear Programming Model of Consumption 45 3.5 Preference 46 3.6 Substitution and Income Effects 48 3.7 Indirect Utility Function 51 3.8 Minimum Expenditure Function 52 3.9 Slutsky Equation 54 3.10 The Supply of Factors of Production 56 3.11 Expected Utility 57 Problems 59 Literature 61 Chapter 4: Market Equilibrium (1) 62 4.1 General Equilibrium 62 4.2 Homogeneity and Walras' Law 64 4.3 Edgeworth Box Diagram 66 4.4 The Existence of an Exchange Equilibrium 68 4.5 Non-existence of Equilibrium 70 4.6 Equilibrium with Production 73 4.7 Economy of Scale 75 Problems 77 Literature 78 Chapter 5: Market Equilibrium (2) 79 5.1 The Input–Output Analysis 79 5.2 Leontief Inverse 81 5.3 (Non) Substitution Theorem 83 5.4 Tâtonnement Process 85 5.5 Hicksian Stability 86 5.6 Frobenius Theorem 89 5.7 The Local Stability 91 5.8 The Global Stability 92 5.9 Instability of an Equilibrium 94 5.10 Non-tâtonnement Process 96 Problems 98 Literature 99 Chapter 6: Perfect and Imperfect Competition 100 6.1 Market Structure 100 6.2 Monopoly 101 6.3 Cournot's Oligopoly Theory 103 6.4 Post-Cournot Theories 105 6.5 Edgeworth's Limit Theorem 106 6.6 A Cooperative Theory of Duopoly (1) 108 6.7 A Cooperative Theory of Duopoly (2) 110 6.8 Kinked Demand Curve 112 Problems 115 Literature 115 Chapter 7: Optimal Allocation of Resources 117 7.1 Welfare Economics 117 7.2 The Concept of Consumers' Surplus 118 7.3 Consumers' Surplus Analysis 120 7.4 General Equilibrium Model of Allocation 123 7.5 Pareto Optimality 124 7.6 Fundamental Theorem (1) 127 7.7 Separating Hyperplane 129 7.8 Fundamental Theorem (2) 131 Problems 133 Literature 134 Chapter 8: Market Failures 135 8.1 Laissez-Faire or Not 135 8.2 Diminishing Cost 136 8.3 Public Enterprises 138 8.4 Externality 140 8.5 Correcting Externalities 143 8.6 Public Goods 146 8.7 Revelation of Preference 148 8.8 Public Goods in Production 151 Problems 153 Literature 154 Chapter 9: Optimal Income Distribution 155 9.1 Voting Paradox 155 9.2 Arrow's Theorem (1) 157 9.3 Arrow's Theorem (2) 159 9.4 Pareto Optimal Redistribution 160 9.5 Utilitarianism (1) 162 9.6 Utilitarianism (2) 165 9.7 Social Contract 167 9.8 No Envy Criterion 170 Problems 172 Literature 173 Chapter 10: Microeconomic Foundations of Macroeconomics 174 10.1 Macroeconomics 174 10.2 Time and Money 175 10.3 Classical Macroeconomics 178 10.4 Classical Unemployment 179 10.5 Keynesian Macroeconomics 181 10.6 Quantity Constraints and Dual Decisions 184 10.7 Fixprice Method 188 Problems 190 Literature 191 About the Author 192 Name Index 193 Subject Index 195 Front Matter....Pages i-xi Introduction....Pages 1-8 Firms and Production....Pages 9-27 Households and Consumption....Pages 29-50 Market Equilibrium (1)....Pages 51-67 Market Equilibrium (2)....Pages 69-89 Perfect and Imperfect Competition....Pages 91-107 Optimal Allocation of Resources....Pages 109-126 Market Failures....Pages 127-146 Optimal Income Distribution....Pages 147-165 Microeconomic Foundations of Macroeconomics....Pages 167-184 Back Matter....Pages 185-192