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An Analytical Framework of Consumer-Producers, Economies of Specialization and Transaction Costs

In: Increasing Returns and Economic Analysis

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  • Mei Wen

Abstract

Samuelson (1967) and Alfred Marshall (1920) consider the essence of economics as the analysis of demand and supply. However, there are two research lines of demand and supply. (1) is Marshall’s line: demand and supply are determined by the tradeoff between quantities of different goods consumed in raising utility and the tradeoff between quantities of different factors in raising output. Relative demand in equilibrium is determined by relative taste, relative technology and relative endowments. Aggregate demand is not the focus of the analysis and is given by the dichotomy between pure consumers and pure producers. In other words, resource allocation is the focus in neoclassical economic theory. Most resource allocation problems are solved in mathematical programming models. (2) is Allyn Young’s line: demand and supply are two sides of the level of division of labour (or its reciprocal the degree of self-sufficiency). The level of specialization and division of labour determines the extent of the market and aggregate demand and supply (Young, 1928, p. 539). Hence, we cannot understand what are demand and supply if we do not know the mechanism that determines individuals’ level of specialization and the level of division of labour for a society as a whole.

Suggested Citation

  • Mei Wen, 1998. "An Analytical Framework of Consumer-Producers, Economies of Specialization and Transaction Costs," Palgrave Macmillan Books, in: Kenneth J. Arrow & Yew-Kwang Ng & Xiaokai Yang (ed.), Increasing Returns and Economic Analysis, chapter 7, pages 170-185, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-26255-7_9
    DOI: 10.1007/978-1-349-26255-7_9
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    Citations

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    Cited by:

    1. Haiou Zhou, 2009. "Evolutionary Dynamics of the Market Equilibrium with Division of Labor∗," Monash Economics Working Papers 12-09, Monash University, Department of Economics.
    2. Diamantaras, Dimitrios & Gilles, Robert P., 2004. "On the microeconomics of specialization," Journal of Economic Behavior & Organization, Elsevier, vol. 55(2), pages 223-236, October.
    3. Guangzhen Sun & Xiaokai Yang & Shuntian Yao, 1999. "Theoretical Foundation of Economic Development Based on Networking Decisions in the Competitive Market," CID Working Papers 16, Center for International Development at Harvard University.
    4. Xiaokai Yang & Dingsheng Zhang, 2005. "Endogenous Structure Of The Division Of Labor, Endogenous Trade Policy Regime, And A Dual Structure In Economic Development," World Scientific Book Chapters, in: An Inframarginal Approach To Trade Theory, chapter 17, pages 383-406, World Scientific Publishing Co. Pte. Ltd..
    5. Dan Yang & Zimin Liu, 2012. "Study on Chinese farmer cooperative economy organization and agricultural specialization," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 58(3), pages 135-146.
    6. Petrenko, D. S., 2018. "Inframarginal models of spatially allocated economic structures and the analysis of production processes," R-Economy, Ural Federal University, Graduate School of Economics and Management, vol. 4(2), pages 72-78.
    7. Cheng, Wenli & Yang, Xiaokai, 2004. "Inframarginal analysis of division of labor: A survey," Journal of Economic Behavior & Organization, Elsevier, vol. 55(2), pages 137-174, October.
    8. Sun, Guang-Zhen & Yang, Xiaokai & Zhou, Lin, 2004. "General equilibria in large economies with endogenous structure of division of labor," Journal of Economic Behavior & Organization, Elsevier, vol. 55(2), pages 237-256, October.

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