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On the Essential Multidimensionality of an Economic Problem: Towards Tradeoffs-Free Economics

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Abstract

The foundation of welfare economics is the assumption of Pareto-efficiency and its concept of tradeoffs. Also the production possibility frontier, efficiency frontier, nondominated set, etc., belong to the plethora of tools derived from the Pareto principle. The assumption of tradeoffs does not address the issue of system design or redesign in order to reduce or eliminate tradeoffs as a sure characteristic of suboptimal, inefficient system configuration. In this paper we establish that tradeoffs are not attributes of objectives, criteria or dimensions, as it is habitually assumed, but are the properties of the very sets of possibilities, alternatives or options they purport to value and measure. We use De novo programming, through which the so called feasible set of opportunities can be redefined towards optimal, tradeoffs-free configuration. The implications of tradeoff-free economics are too vast to foresee and elaborate in a single paper; they do touch the very foundations of economic thought. So me numerical examples are given in order to illustrate system-design calculations in linear systems.

Suggested Citation

  • Milan Zelený, 2009. "On the Essential Multidimensionality of an Economic Problem: Towards Tradeoffs-Free Economics," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 3(2), pages 154-175, July.
  • Handle: RePEc:fau:aucocz:au2009_154
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    1. Taylor, John B, 1979. "Estimation and Control of a Macroeconomic Model with Rational Expectations," Econometrica, Econometric Society, vol. 47(5), pages 1267-1286, September.
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    1. repec:spr:grdene:v:20:y:2011:i:2:d:10.1007_s10726-010-9197-3 is not listed on IDEAS

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    Keywords

    Tradeoffs; multiple criteria; decision making; tradeoffs-free; optimization; De novo programming; Pareto-efficiency; added value;

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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