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The Market in Economics: Behavioural Assumptions and Value Judgments

Author

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  • Sandmo, Agnar

    (Dept. of Economics, Norwegian School of Economics and Business Administration)

Abstract

This paper tries to convey the essence of the economic theory of behaviour of individuals and firms to an audience of non-economists. The hypotheses of utility and profit maximization and their use as building blocks in the theory of market equilibrium are explained. The paper discusses the efficiency of the market mechanism and sources of market failure. It considers the origin of preferences and the role played by ethical and religious views for consumer demand and labour supply. It concludes by discussing the role of economic theory in the design of institutions and considers the view that the introduction of market incentives in new areas may be harmful to society.

Suggested Citation

  • Sandmo, Agnar, 2014. "The Market in Economics: Behavioural Assumptions and Value Judgments," Discussion Paper Series in Economics 12/2014, Norwegian School of Economics, Department of Economics.
    • Handle: RePEc:hhs:nhheco:2014_012
    as

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    File URL: http://brage.bibsys.no/xmlui/bitstream/handle/11250/194581/1/SAM1214.pdf
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    References listed on IDEAS

    as
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    3. Hirschman, Albert O, 1982. "Rival Interpretations of Market Society: Civilizing, Destructive, or Feeble?," Journal of Economic Literature, American Economic Association, vol. 20(4), pages 1463-1484, December.
    4. Roland Bénabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(3), pages 489-520.
    5. Timothy Besley, 2013. "What's the Good of the Market? An Essay on Michael Sandel's What Money Can't Buy," Journal of Economic Literature, American Economic Association, vol. 51(2), pages 478-495, June.
    6. Edward P. Lazear, 2000. "Economic Imperialism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(1), pages 99-146.
    7. Gary S. Becker, 1981. "A Treatise on the Family," NBER Books, National Bureau of Economic Research, Inc, number beck81-1, March.
    8. Luigino Bruni & Robert Sugden, 2013. "Reclaiming Virtue Ethics for Economics," Journal of Economic Perspectives, American Economic Association, vol. 27(4), pages 141-164, Fall.
    9. Michael J. Sandel, 2013. "Market Reasoning as Moral Reasoning: Why Economists Should Re-engage with Political Philosophy," Journal of Economic Perspectives, American Economic Association, vol. 27(4), pages 121-140, Fall.
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    Cited by:

    1. Bello Musa Zango & Sanni Mohammed Lekan & Mohammed Jibrin Katun, 2020. "Conventional Methods in Housing Market Analysis: A Review of Literature," Baltic Journal of Real Estate Economics and Construction Management, Sciendo, vol. 8(1), pages 227-241, January.
    2. Peter Birch Sørensen, 2015. "Reforming Public Service Provision: What have we learned?," EPRU Working Paper Series 2015-01, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.

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    More about this item

    Keywords

    Utility and profit maximization; incentives; welfare.;
    All these keywords.

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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