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Decision Based Economic Theory

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  • Oskam, Arie J.

Abstract

Decision based economic theory stresses the central position of the objective function in the behavior of economic agents. Insufficient knowledge of objective functions hampers the development of economic theory. In this article, a methodology for deriving objective functions from conscious decisions has been developed. Three categories of decisions are concerned: positive, negative, and mutually exclusive decisions. Assuming minimal inconsistency, the objective function can be derived by means of linear or nonlinear programming and using a revealed preference approach. The method has been applied to derive the linear objective function of EC dairy policy. However, applications of this methodology for consumers and producers are similar. A number of issues related to the formulation and interpretation of the objective function are discussed.

Suggested Citation

  • Oskam, Arie J., 1988. "Decision Based Economic Theory," Staff Papers 14075, University of Minnesota, Department of Applied Economics.
    • Handle: RePEc:ags:umaesp:14075
    DOI: 10.22004/ag.econ.14075
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    File URL: https://ageconsearch.umn.edu/record/14075/files/p88-38.pdf
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    References listed on IDEAS

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    Cited by:

    1. Oskam, Arie J. & von Witzke, Harald, 1990. "Agricultural Policy Preferences: Wheat In The United States, 1981-1990," Staff Papers 14004, University of Minnesota, Department of Applied Economics.
    2. Johnson, R.W.M., 1995. "Modelling Government Processes and Policies in Agriculture: A Review," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 63(03), pages 1-11, December.
    3. Fertő, Imre, 1998. "Az agrárpolitika politikai gazdaságtana I. A kormányzati politikák modellezése a mezőgazdaságban [The political economy of agrarian politics. Part I. Modeling of governmental policies in agriculture. Modeling of governmental policies in agricultur," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 223-246.

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