24.10.2017
“A new approach to the general theory of market economy: Content and main results” – for the coming book presentation of the MSE MSU Director Prof. Alexander Nekipelov “The General Theory of the Market Economy”.

A presentation of the new book by the MSE MSU Director Prof. Alexander D. Nekipelov “The General Theory of the Market Economy will be held at the Moscow School of Economics on October 26.

The first review of this book has already been published in the newspaper of the Russian scientific community “Poisk”

In connection with the upcoming presentation, we suggest that the readers of our site get acquainted with the “new approach to the general theory of a market economy” as proposed by the author.

New Approach to General Theory of Market Economy: The Concept and Basic Results[1]

The book is the result of many years of work by the author in the field of general economic theory. The first results were published in a monograph in 2006[2]. They had been developed during further research and tested — in addition to conventional publications — in the courses of lectures. The latter were given by Prof. A. Nekipelov for both masters and bachelors at Moscow School of Economics, Moscow State University (MSE MSU) beginning from its establishment in 2004.

“The General Theory of Market Economy” is organized in such a way that it can be used at the first (bachelor) and second (master’s degree) stage of higher economic education. It seems that it might also be useful for postgraduate students interested in the methodological and theoretical problems of economic science.

To be comprehensible for freshmen the main text of each chapter of the manual uses the mathematical apparatus minimally. In fact, it’s application here is reduced to graphic representations of the considered models and, in limited cases, to the formulation of the terms of those models or conclusions arising from them. In the most important places numerical examples are given. They provide students with the opportunity to feel better the basic ideas contained in the economic constructs, formulated earlier on a verbal level. The idea is to make the student understand at the initial stage of training both the essence of the problems facing economic theory and general approaches to tackling them. This is believed to be very important for the student to gradually master the so-called “economic thinking”. Addressing the same objectives are the lists of new terms, test questions and exercises, which are placed at the end of each chapter.

At the same time, in many cases main texts of the chapters are accompanied by mathematical appendixes. It is this part of the work (as well as methodological issues raised in the main text) that is important for the training of masters and PhD students. In addition, mathematical appendixes can be thought of as “to grow into” dress for first-year students. Author’s experience in teaching the course “Introduction to economic theory” at the MSE MSU convinced him that there are always inquisitive students who wonder what methods are needed both to formalize the logical constructs contained in the main text of the chapters and to see strong evidence of the conclusions made. Mathematical appendixes help to get information on this subject from the manual. Finally, their existence helps students to feel from the very beginning the importance of mathematical apparatus for modern economic theory.

“The General Theory of Market Economy” makes it possible for students to master the main body of knowledge contained in the basic courses of micro- and macroeconomics. As the experience of MSE MSU shows, this greatly facilitates for them the perception of material of the advanced courses in these areas of modern economic science. But this is only one side of the case. Another, no less important, is that the book by Prof. A. Nekipelov proposes a qualitatively new approach to building economic theory as well as to interpretation of some individual issues, which seemed to be definitely settled long ago. From this perspective, the author has tried to transform into the form of a textbook the results of multi-year research.

Since A. Marshall economic theory — and not only in the English language literature – is usually called “Economics”. Earlier, for about three hundred years it had been called political economy. Due to Jh.M. Keynes economic theory found itself split into two parts — micro- and macroeconomics. Since then the clear majority of textbooks devoted to this field of knowledge bear these names.

This course of events has had its own logic which is discussed in the book (see especially the first chapter and the last chapters, starting with the twenty-fifth). However, Prof. A. Nekipelov tries to show that the treatment of micro- and macroeconomics as two sections of general economic theory should be qualified as one of the manifestations of its crisis. According to him (see chapter twenty-six), these two parts of “economics” are based on qualitatively different set of axioms and play a different role both in understanding the nature of the economic system and in formation of economic policy. A qualitative difference between these two sections of modern economic theory is most obvious in their interpretation of the social optimum (see below).

The bulk of “The General Theory of Market Economy” is related, according to the author, to so-called “pure theory”. Such a theory is supposed to have a specific mission. Starting with a set of axioms and using a deductive method, it aims to build a kind of intellectual layout of economic system (in this case — the market economy), which helps understand the nature of relationships, emerging among its principal elements. Having this in mind it should be noted that pure theory and practice do not, and cannot be directly connected; there is a “zone of uncertainty” between them (see the final subsection of the twenty-eighth chapter). According to Prof. A. Nekipelov, the very existence of such a zone can be understood only considering the intrinsic difference between natural and social sciences. The latest deal with the interaction of people, who, unlike the atoms and molecules possess consciousness, interests and the consequent ability not only to adapt to external conditions, but also deliberately change them. One should rather be surprised not with a lack of a bridge, directly connecting theory and practice in economic sphere, but with the ability of the theory based on a set of axioms and logical conclusions to give a holistic picture of the economic system, which is generally in line with our perception of the way real economy functions.

The author believes that microeconomics corresponds to a certain degree to the standards of pure science. It has great achievements in the analysis of functional dependencies, manifesting “on the surface” of modern market economy. However, its major drawback, according to Prof. A. Nekipelov, consists in complete ignorance of the economic relations and the underlying institutions “logical evolution”. He does not mean a deficiency of historical descriptions of the process of development of economic relations. The idea is that to get a holistic picture of the object one must find a path, which would logically lead him from the simplest representation of the object to its complex, developed forms. The reduction of the analysis exclusively to economic forms as they appear in real life (“on the surface”) inevitably results in explanation of one phenomenon with the aid of other phenomena, which have not been earlier explained (“deduced”) themselves. A consumer problem, which is often the first model discussed in microeconomics text-books, is a good example. It describes the way the consumer should act to choose the bundle of goods, which maximizes utility, his income and the market prices given. But where have prices, income and, therefore, money come from, what is their economic essence? It is silently presupposed that the student somehow knows it from his own experience. But this means that economic models formulated in such a way are “deprived of depth”: they reflect the subject as if it had neither history, nor future.

Deduction of the main characteristics of the economic system starting from one of its very simple features was initiated in “Das Kapital” by Karl Marx. The implementation of this method places special demands to the selection of the model, which should be used as a starting point of research: the latter should be as simple as possible to minimize the amount of exogenously imposed concepts in the form of axioms.

In the monograph, published in 2006, Prof. A. Nekipelov concluded that the so-called “Crusoe model” should constitute the starting point of research for pure economic theory. Consequently, the first section of the present book – The General Theory of Market Economy — is entirely dedicated to the analysis of “basics of economic behavior of the individual”[3]. The study of “Crusoe model” is most important because it introduces in the simplest form many of the concepts essential to understanding modern market system.

On this level of analysis, the time of individual’s life devoted to any productive or leisure activity is considered as the true cost he incurs. Accordingly, the challenge facing him is to maximize welfare by using optimal time allocation between different production activities and leisure. Using text-book axioms relating to human preferences and production activities, the author shows first how Crusoe should deal with this task in a situation of certainty, with unlimited natural resources and within a unit period. Then he introduces into analysis resource constraints, the time factor, as well as the conditions of uncertainty.

Basing on the results obtained in the analysis of the Crusoe model the second section of the book — “The economics of in-kind exchange”- identifies the driving forces which give birth to relations of exchange and development of division of labor between individual economic agents. At the beginning “Crusoe plus Friday model” is used to show how the difference in the rates of substitution of goods between the two economic agents can make mutual exchange and, later, division of labor beneficial for them. Then the model is expanded to many economic actors, which makes it possible to demonstrate the factors leading to the development of stable specialization of individual producers. On this level of analysis new fundamental notions are introduced into analysis: private property, commodity exchange, proportions of exchange, general (Walras) equilibrium, Pareto efficiency etc.

The next, third section of the work is devoted to the exploration of the changes, which the economy based on in-kind exchange undergoes with the emergence of money. This economic system is called in the book the simple market economy because it lacks one of the important markets – that of labor. The main actors within such a system are, therefore, still individual producers linked together by the social division of labor.

The emergence of money is regarded as a process generated by the aspiration of economic agents to reduce huge transaction costs, which accompany in-kind exchange. As a result, from the variety of goods one is chosen as a universal equivalent by means of natural selection. Along with the well-known money functions – a measure of exchange value, a means of exchange, a means of accumulation and a means of payment – the author introduces a new one – that of a means of borrowing. This new function of money is meant to explain its role in the mediation of “transtemporal exchange”, identify the factors that lead to the appearance of consumer credit, determine the nature of interest rate and understand the way its equilibrium level is formed.

In money economy the concept of costs and effects, which was introduced in the analysis of the “Crusoe model”, undergoes a modification. Both can now be expressed in money terms. Net money income – a difference between gross income and money expenditures — serves as a measure of utility. Moreover, net income can now be split in factor incomes: capital yield, rental income and a residual income, which the author calls “labor income”. Prof. A. Nekipelov shows that the capital yield can be determined with the use of two methods. According to the first it is equal to the sum of the accrued amortization of capital and an interest on its initial (full) value. According to the second method capital yield is a sum of the volume of its depreciation and an interest on its residual (initial minus depreciation) value[4]. Capital yield and rental income can be regarded as opportunity costs of the respective factors of production – physical capital and land. It follows, therefore, that maximization of the residual income (labor income) turns out to be the objective function of individual producer in the simple market economy.

The analysis of the objective function of individual economic agent together with his consumption preferences constitutes a basis for the research of his behavior both as a producer and a consumer. Thus, individual (consumer and production) demand and supply functions are constructed.

Understanding the behavior of individual economic agent is, in its turn, a prerequisite for the analysis of partial and general equilibrium in conditions of perfect competition in this simplified version of market economy. Within partial analysis the author shows how individual demand and supply functions are transformed in the respective branch functions and how partial equilibrium is realized. The achievement of general equilibrium is directly linked to the reallocation of productive resources between the branches of the economy. To let students better realize interconnections between different parts of the economy the basics of input-output model are given here. This makes it possible to introduce already on this level such macroeconomic notions as aggregate demand and supply, aggregate investments and savings, final and intermediate products, aggregate value-added. From the point of view of methodology applied in this book it is very important that aggregated value indicators are inextricably linked to those numerous concrete transactions that lay at their foundation.

An extremely complex problem of group (social) choice, which has no commonly accepted interpretation in economic theory, is the subject of the final chapter of the third section. The need for such analysis on this level of investigation arises due to the necessity both to tackle some additional issues within the simple market economy, on the one hand, and to lay foundation for further research, on the other hand. As far as the simple market economy is concerned, two special groups are of interest: households and the society, represented by the government. Both these groups influence significantly the allocation of resources and therefore it is important to understand the way they make decisions. This understanding is also important for the forthcoming analysis of the firm behavior, because the capital of many firms belongs to many (thus, to a group of) owners.

Different approaches to social choice problem are examined in the book. Prof. A. Nekipelov shows why the idea that any group possesses its own preferences should, unfortunately, be discarded. He, therefore, adheres to those researchers who believe that the social choice is made on the basis of reconciliation of individual interests of the group members. But it is very important to understand that such a harmonization is possible only when the members of a group have accepted the basic rules (the so-called “basic institutions”), which would mediate the adoption of joint solutions. From this perspective, the market should be regarded as one of the instruments of coordination of individual interests. But it can fulfill its functions only when economic agents are free to take decisions, respect private property rights and the commitments they take upon themselves in their economic relations.

No doubt, such an approach to social choice problem is characterized by the circularity of assumptions and conclusions: to make common decision the members of a group must agree in advance how common decisions should be taken. But this obvious tautology, according to the author, has more advantages than drawbacks: it is consistent with actual procedure used to set up many groups and, what is even more important, it helps understand the reasons why many groups turn out to be short-lived. Thus, this approach corresponds to the relativity of group interests.

The fourth section of the work is devoted to the theory of the firm.

In the analysis of technological foundation of this economic agent, prevalent in the modern market economy, Prof. A. Nekipelov introduces the concept of basic production system. The latter is a combination of production factors ensuring the output of a predetermined scale. Progress in science and technology at certain moment leads to formation of such basic production systems that involve co-operation of many workers. Then the technological preconditions of the firm emerge. The author uses the famous R. Coase’s approach to justify the reasons for which the company usually relies on several rather than one basic production systems. As a result, one should distinguish now not only between social and intra-firm division of labor, but also between the technological division of labor within basic production systems and division of labor between them within a firm.

A wide range of issues become a subject of study within the socio-economic analysis of the nature of the firm. The author pays serious attention to the debate about whether the firm is an economic agent or a kind of a space within which special economic relations (opposed to those outside the firm) are being formed. The role and the functions of different agents operating within a firm (owner of capital, entrepreneur, manager and hired worker) are thoroughly analyzed. Much attention is paid to changes, which the market economy undergoes because of transition from individual labor to co-operation of many employees within a firm.

Special emphasis is made on the analysis of the competitive firm behavior. Prof. A. Nekipelov acquaints readers with the standard treatment of the problem, based on the assumption that the objective function of the firm consists in maximizing economic profits. He calls “neoclassical” a company with such a motivation. However, the manual provides a detailed analysis of the “classical firm” behavior based on the maximization of the rate of accounting profit (return on capital). This analysis helps identify both common and different features in the behavior of these two types of the firm. The author pays much attention to the following question: which of the two motivations most closely matches the nature of capitalist firms? His conclusion is that it is the motivation of the “classical firm”, that is maximization of the return on capital.

In the final chapter of this section the reproduction of firm’s capital is investigated; thus, the analysis is shifted into the sphere of economic dynamics. The process of capital turnover is examined along with the types of reproduction of the firm’s capital. The main text of the chapter provides an overview of the theory of optimum control as a modern tool for examining issues of economic dynamics; the annex provides its strict mathematical formulation. The author also traces the origins of the tendency to integration of production systems (concentration of capital), as well as to separation of ownership from management.

The subject matter of the fifth section is a study of industry markets. One part is devoted to the analysis of the characteristics of different market structures — perfect competition, monopoly, oligopoly, and monopolistic competition. Here the difference from the standard presentation of these issues in economics textbooks consists in that these market structures are explored for two sets of conditions: when the industry firms tend to maximize economic profits and when they are focused on the rate of return on invested capital.

Later on, specific features of market mechanism in various sectors of the economy are investigated. The text of the manual provides a general description of the structure of social production grouping the industries according to two different criteria. The first one differentiates the branches in relation to tangibility or intangibility of their output, the second – in relation to their being a part either of the real sector of the economy or, what the author calls, “system-servicing activities”[5].

An integral part of the industry analysis is the study of market failures. Along with the analysis of standard market failures, resulting from the existence of information asymmetry, public goods, externalities and violations of perfect competition, Prof. A. Nekipelov indicates that there exists a special market failure – inability of the market to consider the so-called “non-egoistic part” of individual preferences. Hence, the important conclusion follows: given institutions, necessary for the functioning of market mechanism, general equilibrium can be considered as the embodiment of the social optimum only if all economic agents possess individual preferences specific to the “economic man” of A. Smith.

The sixth section of the book is devoted to studying of the financial sector wherein “system-servicing activities” of critical importance for the efficient functioning of the market economy are concentrated. This sector is explored from the perspective of its contribution to the efficient use of resources.

The monetary and credit system is an important element of the financial sector. Its functioning is examined both in conditions of commodity money (the gold standard), and fiat (credit) money. In accordance with the methodology adopted in this book special attention is paid to the factors which determined the abandonment of the gold standard.

Detailed information is given on the main securities and operations with them. The author attracts students’ attention to the intrinsic link existing between money market and the market of financial assets. A special chapter deals with the problem of financial assets management. The “modern portfolio theory” and the “capital assets pricing model” (CAPM) are described in detail.

In the final chapter of the section special attention is paid to the examination of the nature of financial capital and its role in modern economies. The author defines the financial capital as a special form of capital oriented exclusively on extraction of profit from financial investments. The controversial role of this form of capital for the functioning of the financial system and development of financial crises is the core of this analysis.

Economic system exists in space and time. From those perspectives, it is investigated in the seventh section of the manual.

Unlike most authors of economic textbooks, Prof. A. Nekipelov gives readers a basic understanding of the so-called “economy of pure space”, which describes general regularities of distribution of productive forces, the role, which transportation and rental factors play in this process. At the same time, the author pays much attention to the examination of the national and world economies as two spatial forms of organization of economic life implying each other.

The existence of autonomous national monetary systems and special systems of foreign economic relations management at the national level are considered as key factors, which determine the specificity of international economic relations as compared to relations within the domestic context. The economic role of national borders, according to Prof. A. Nekipelov, results from the fact that the international sphere is shaped by the interests not only of individual persons and firms, but of the competing national states as well. This fact leaves its mark on the course of the globalization process. The oversimplicity of the view, in accordance with which technological progress predetermines the one-way traffic of the world economy to the formation of a homogeneous market environment, is obvious for this very reason. The process will, definitely, have a character of a game. It will be accompanied by a struggle of transnational, national and regional interests, painful harmonization of positions regarding the “rules of the game” on the world stage and will take a very long time.

The dynamics of the economic system as a whole – another topic of this section — is analyzed from two perspectives – those of pure economic theory, on the one hand, and classical macroeconomics, on the other.

In terms of pure economic theory, optimal trajectory of time travel of the economic system consists in its gradual transition from one point of social optimum to another. When the members of society are the so-called “economic men” of A. Smith, those points of harmonized individual interests are the general equilibrium positions. Therefore, the dynamics of economic system cannot be described by pure economic theory with a single indicator; such a description involves numerous components of a vector, describing the changing scale and structure of the economy. Due to this multi-dimensionality of the dynamic process the adequate term for its description is “economic development” rather than economic growth.

In contrast to this approach classical macroeconomics qualifies the dynamic process of the economic system as an economic growth, which is characterized by a single indicator — changes in the volume of gross domestic product (total or per capita). On the one hand, this reduces the complex, “vector” reality to a simplified scalar representation, which, in addition, is at odds with one of the basic axioms of pure economic theory — namely with the incomparability of individual levels of welfare[6]. At the same time, this approach makes it possible to describe the dynamics of the economic system in a simple and comprehensible way.

The final eighth section of the book deals with possibilities of the authorities to influence economic development in situations when they believe that the mere action of market mechanism cannot ensure the social optimum. As already noted above, pure economic theory is unsuitable for solving practical problems. That is why the government must act in the spirit of “second best” to come closer to the optimal state of society. To this end, it uses both macroeconomic and microeconomic policies.

The objective of macroeconomic policy in the long-run is to maintain a steady economic growth, and in the short- run — to keep the volume of production on the level of potential output. The manual provides basic macroeconomic models aimed to address these challenges. But it also shows that they are not suitable in their immediate form for making unambiguous conclusions about the consequences of different policy decisions. This is because some of the key parameters (the nature of prevailing expectations, the speed of adaptation of the economy to shocks etc.) are exogenous for these models, and the representatives of different currents of macroeconomic science have different views on their nature. Moreover, it turned out to be impossible, basing on actual data analysis, to determine which of these views are correct and which are not: in different periods and situations the results vary. This means that to justify with the aid of the above-mentioned models which action should be taken, it is necessary to estimate the state of the exogenous parameters at this very point in time. To make this the recourse to other sciences -econometrics, sociology, mass psychology, etc. – is needed.

On their part, microeconomic policies aim at the compensation of market failures, on the one hand, and, on the other, at the correction of market mechanism in cases where the authorities consider its results as non-optimal from the social point of view. The manual summarizes the major types of economic policies which are supposed to introduce changes in the allocation of resources. It is, however, recalled that the key question of the social optimum state has no precise theoretical answer and the authorities must formulate economic policy on the basis of multi-disciplinary analysis of the situation and their normative views.

The approach realized in the manual allows to make a couple of important conclusions of a general nature.

The first conclusion. Pure economic theory, built on axiomatic basis and a deductive method, provides with the opportunity to get in-depth knowledge about the nature and subordination of the major structural elements of the economic system, understand the key mechanisms of its functioning and development. It also allows to logically explain the impossibility to identify in a precise form the social optimum state.

At the same time, pure economic theory is fundamentally not suited to be used for formulation of economic policy. This assertion is enough to affirm that pure theory does not need any “dock” with other social disciplines within the so fashionable multi-disciplinary analysis. Presenting a look on society from an economic perspective (rather than being a science, describing a separate sector of society), pure economic theory contains within itself (rather than at the “joints”) cultural (recall economic agent’s preferences), political (recall the problem of social choice) and legal (recall, the basic institutions of the market economy) components.

The second conclusion. Macroeconomics is built on other postulates than pure economic theory. It gives, so to say, a “rough” representation of economic reality because it deliberately simplifies the structure of the economy. But it is precisely because of this, that macroeconomic theory allows to make explicit assessment of economic development and, together with a few of other sciences (here’s where multidisciplinary matters!) to formulate practical recipes. Thus, heterogeneous scientific knowledge is not needed to understand the nature of economic problems. They are rather needed to formulate specific recipes for specific situations. Moreover, these recipes do not qualify for achieving more than some approximation to a socially desirable outcome.

Annex

Table of Contents

Forword

Chapter 1. Instead of an introduction: On the approach to economic theory, realized in the present manual

1.1. On the question of the subject matter of general economic theory

1.2. Considerations relating to the methodology of theoretical analysis

1.3. On the structure of the manual

Section one. The basics of individual behavior

Chapter 2. Crusoe model: the basic characteristics of production and consumption

2.1. Initial conditions and the essence of the problem

2.2. Production

2.3. The system of preferences

Chapter 3. Crusoe model: maximization of utility

3.1. Maximization of utility in conditions of unlimited resources

3.2. Maximization of utility in conditions of scarce resources

3.3. Maximization of utility: the role of time

3.4. Initial considerations relating to the role of knowledge for economic development

Chapter 4. Maximization of individual wellfare in conditions of uncertainty

4.1. Uncertainty and risk

4.2. People’s attitude towards risk

4.3. Decision-making in risky environment

4.4. A possibility to reduce risk for Crusoe

Section two. Economy of in-kind exchange

Chapter 5. Pure exchange and the foundations of division of labor

5.1. Pure exchange

5.2. Foundations of division of labor

5.3. Exchange and related institutes

Chapter 6. Basic conditions of general equilibrium in the economy based on individual production

6.1. Pure exchange between numerous participants of the division of labor

6.2. General equilibrium in conditions of social division of labor

6.3. On the continuation of production in the sphere of consumption and the limits of the division of labor

6.4. Uncertainty related to the social division of labor

Section three. Simple market economy

Chapter 7. Money and its functions

7.1. Measure of exchange value

7.2. Means of circulation

7.3 Means of borrowing

7.4. Means of accumulation

7.5. Means of payment

Chapter 8. The production factors and factor incomes in the simple market economy

8.1. The consequences of the transformation of objects of labor in the commodity

8.2. Physical capital and its income

8.3. Natural resources and the rent

8.4. Labor and labor income

Chapter 9. Individual producer: specific features of economic behavior

9.1. The patterns of production

9.2. The patterns of individual consumption

Chapter 10. Partial and general equilibrium in the simple market economy

10.1. Perfect competition

10.2. Demand and supply in individual markets

10.3. Intersectoral linkages, structure and volume of social production

10.4. General equilibrium

Chapter 11. The market and “small groups” in the context of social choice

11.1. The concept of social choice

11.2. The theory of reconciliation of individual interests

11.3. “Small groups” in the process of reconciliation of individual interests

Section 4. The theory of the firm

Chapter 12. Technological foundations of the firm

12.1. Scientific and technological progress and its driving forces

12.2. Technological structure of the economy

12.3. Intra-firm and social division of labor

12.4. Additional data relating to the production function

Chapter 13. The socio-economic nature of the firm

13.1. The firm: an economic agent or a place of specific transactions?

13.2. The firm as a product and a focus of entrepreneurial activity

13.3. Hired labor and the related transformation of the market economy

13.4. On the character of changes in the market economy as a result of substitution of firms for individual economic agents

Chapter 14. The behavior of the competitive firm

14.1. Maximization of economic profit

14.2. Maximization of the rate of accounting profit

14.3. Numerical example

14.4. The impact of uncertainty

14.5. Economic profit or a rate of profit

Chapter 15. The firm in a dynamic enviorment: the process of reproduction of individual capital

15.1. The circuit of individual capital

15.2. The types of a circuit of individual capital

15.3. Evolution of the firm as a result of the trend to enlargement of production systems

15.4. Management of firm: from theory to practice

Section five. Sectoral markets: organization and efficiency

Chapter 16. The capitalist branch of perfect competition

16.1. Long-run equilibrium

16.2. Short-run equilibrium

16.3. Equilibrium in intermidiate-run perspective

16.4 Numerical example

Chapter 17. The monopoly

17.1. The behavior of neo-classical monopoly: long-run perspective

17.2. Long-run behaviors of the “classical monopoly”

17.3. Short-run perspective

17.4. Numerical example

Chapter 18. Market structures of unperfect competition

18.1. The oligopoly

18.2. The branch of monopolistic competetion

Chapter 19. Features of the operation of the market mechanism in different industries

19.1. The structure of social production

19.2. Features in the organization of industries belonging to the real sector of the economy

19.3. “Market failures”

Section six. Financial sector of the economy

Chapter 20. Money and credit system and its role in the efficient use of resources

20.1. Finance and financial sector

20.2. Money and credit system in conditions of gold standard

20.3. Money and credit system after the abandonment of gold standard

Chapter 21. Financial markets and financial instruments

21.1. General characterististics of financial markets

21.2. Once more on the relationship between the money market and financial markets

Chapter 22. The management of financial assets

22.1. The modern portfolio theory

22.2. The evaluation of financial assets

22.3. Money as a financial asset

22.4. Financial capital and financial crises

Section seven. Economic system in space and time

Chapter 23. Spatial organization of economic life

23.1. Economics of “pure space”

23.2. Production and market: the spatial dimension

23.3. National economy as a form of spatial organization of economic life

Chapter 24. World economy

24.1. General view

24.2. Multicurrency and its consequencies

24.3. The impact of the existence of national systems of economic management upon the character of international economic relations

24.4. Globalization of economic life

Chapter 25. Economic system dynamics: the view from the perspective of pure economic theory

25.1. Economic dynamics and the process of social reproduction

25.2. Long-run trend of economic development and short-run fluctuations

Chapter 26. Economic system dynamics: the view from the perspective of classical macroeconomics

26.1. The theory of economic growth

26.2. Short-run and intermidiate-run economic dynamics from the position of classical macroeconomics

26.3. The origins and consequences of the differences between the two approaches to the analysis of economic dynamics

Section eight. The state as an instrument of social choice

Chapter 27. Macroeconomic policy features

27.1. Supply-side economics

27.2. Demand management in a closed economy

27.3. Demand management in an open economy

27.4. Inflation costs and anti-inflation policy

27.5. Specific features of different macroeconomic schools

Chapter 28. The role of state in resource allocation

28.1. Financial policy from a microeconomic angle of view

28.2. General characteristics of economic policies introducing corrections in resource allocation with the aid of state budget

28.3. Policies counteracting market failures with the aid of systemic measures

28.4. In search of a social optimum

  1. A. Nekipelov. “The general Theory of Market Economy”. Moscow Publishing House. “Magister”, 2017 (А. Некипелов. Общая теория рыночной экономики. М.: Магистр, 2017)
  2. See: Nekipelov, A. Formation and functioning of economic institutions. From “Crusoe model” to market economy based on the individual production. M.: Ekonomist, 2006 (А. Некипелов. Формирование и функционирование экономических институтов. От «робинзонады» до рыночной экономики, основанной на индивидуальном производстве. М.: Экономист, 2006)
  3. A table of contents of the book is presented in the Annex
  4. It is clear, then, that, contrary to common understanding amortization of physical capital and its depreciation do not coincide with each other. This is shown in detail in the book.
  5. The products of “system-servicing activities” — in contrast to the products of branches, belonging to the real sector of the economy — are neither consumer goods, nor (intermediary) goods, which belong to a technological chain resulting in the production of a consumer good. Trade and financial intermediation, as well as production of means of exchange (money) are, thus, examples of “system-servicing activities”. They are called so because they contribute to the efficiency of the economic system.
  6. This axiom is violated when we characterize the sum of individual incomes – one of the three ways to determine the GDP – as an indicator of social wellbeing.


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