Decision Based Economic Theory
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.
|Date of creation:||1988|
|Date of revision:|
|Contact details of provider:|| Postal: 231ClaOff Building, 1994 Buford Avenue, St. Paul, MN 55108-6040|
Phone: (612) 625-1222
Fax: (612) 625-6245
Web page: http://www.apec.umn.edu
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- R. R. Officer & A. N. Halter, 1968. "Utility Analysis in a Practical Setting," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 50(2), pages 257-277.
- Simon, Herbert A, 1978. "Rationality as Process and as Product of Thought," American Economic Review, American Economic Association, vol. 68(2), pages 1-16, May.
- Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-73, July.
- Johansen, Leif, 1969. " An Examination of the Relevance of Kenneth Arrow's General Possibility Theorem for Economic Planning," Economic Change and Restructuring, Springer, vol. 9(1-2), pages 5-41.
- Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, 1.
- Burgess, David F., 1975. "Duality theory and pitfalls in the specification of technologies," Journal of Econometrics, Elsevier, vol. 3(2), pages 105-121, May.
- Van Herwaarden, Floor G. & Kapteyn, Arie, 1979. "Empirical comparison of the shape of welfare functions," Economics Letters, Elsevier, vol. 3(1), pages 71-76.
- Stiglitz, Joseph E, 1985. "Information and Economic Analysis: A Perspective," Economic Journal, Royal Economic Society, vol. 95(380a), pages 21-41, Supplemen.
- Burton, Michael, 1985. "The Implementation of the EC Milk Quota," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 12(4), pages 461-71.
- Appelbaum, Elie, 1978. "Testing neoclassical production theory," Journal of Econometrics, Elsevier, vol. 7(1), pages 87-102, February.
- Van Praag, Bernard M. S. & Kapteyn, Arie, 1973. "Further evidence on the individual welfare function of income: An empirical investigatiion in The Netherlands," European Economic Review, Elsevier, vol. 4(1), pages 33-62, April.
- Lopez, Ramon E., 1984. "Estimating labor supply and production decisions of self-employed farm producers," European Economic Review, Elsevier, vol. 24(1), pages 61-82.
When requesting a correction, please mention this item's handle: RePEc:ags:umaesp:14075. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If references are entirely missing, you can add them using this form.