The Scope and Method of Political Economy in the Light of the "Marginal" Theory of Value and of Distribution

Wicksteed, Philip H.

doi:10.2307/2221810

Cited by 69 publications

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“…The implication of this subjectivist view on costs, one illustrated by the airline oversales auction, is that the supply curve for a good or service (in this case airline seats) is part of the total demand curve for a good or service (see Wicksteed, 1914, p. 13). In strictly physical sense, it is indeed the case that there are a finite number of seats on an airline, which would seem to imply their costs are objective, and therefore determining the price of airline seats.…”

Section: Airline Oversales Economic Calculation and Transaction Costsmentioning

confidence: 99%

“…A better understanding of this Pareto-improving result requires a consistent application of a subjectivist approach to the nature of cost. This subjectivist view of costs, first developed by the Austrian economist Friedrich von Wieser (1893Wieser ( [1956Wieser ( ], 1914Wieser ( [1927), and expounded by Phillip Wicksteed (1914), was later adopted not only by Armen Alchian (see Alchian & Allen, 1972, pp. 95-97), the pioneer of property rights economics, but also further developed by James Buchanan (1969) and Ronald Coase (1938Coase ( [1981), pioneers of the publicchoice economics, and law and economics, respectively.…”

Section: Airline Oversales Economic Calculation and Transaction Costsmentioning

confidence: 99%

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Economic calculation and transaction costs: The case of the airline oversales auction system

Boettke

Candela

Jacobsen

2023

Southern Economic Journal

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According to Nobel Laureate Edmund Phelps (2013, p. 123), Mises's critique of economic calculation under socialism renders him the originator of the economic analysis of property rights. This paper also suggests that implicit to Mises's impossibility theorem was also the origins of the theory of transaction costs. This raises the following question: what is the relationship, if any, between the process of economic calculation and the concept of transaction costs? Filtered through a Misesian lens, we argue that transaction costs are the costs of engaging in economic calculation. We illustrate our theoretical point utilizing the case of airline oversales auction system first proposed by Julian Simon (1968).In doing so, we reframe the problem of airline oversales from a transaction-cost approach, one in which property rights in airline seats are initially poorly defined. By doing so, we illustrate that resources expended to discover the valuable attributes of a good (in this case airline seats), the terms of exchange between potential trading partners, as well as enforcing the terms of an exchange, all of which are transaction costs, are also, by definition, the costs of calculating the exchange value of goods. Thus, the airlines oversales auction system is illustrative of an institutional solution to the problem of economic calculation via a reduction of transaction costs.

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Section: Airline Oversales Economic Calculation and Transaction Costsmentioning

confidence: 99%

Section: Airline Oversales Economic Calculation and Transaction Costsmentioning

confidence: 99%

Economic calculation and transaction costs: The case of the airline oversales auction system

Boettke

Candela

Jacobsen

2023

Southern Economic Journal

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“…Green (1894) introduced the phrase ''opportunity cost'' to economics literature. The concept was further developed by, among others, Philip Wicksteed (1910Wicksteed ( , 1914, Frank Knight (1928, 1934, Armen Alchian (1968), James Buchanan (1969), andRobert Nozick (1977). 2 Margolis (2007) calls the question ''odd'' and compares it to the ''Monty Hall problem'' in its ability to generate illusory responses.…”

Section: Introductionmentioning

confidence: 99%

“… introduced the phrase “opportunity cost” to economics literature. The concept was further developed by, among others, Philip , , Frank , , Armen , James , and Robert .…”

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confidence: 99%

Do Economists Recognize an Opportunity Cost When They See One? A Dismal Performance or an Arbitrary Concept?

Potter

Sanders

2012

Southern Economic Journal

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asked 199 professional economists a multiple‐choice question about opportunity cost. Given that only 21.6% answered “correctly,” they conclude that professional understanding of the concept is “dismal.” We challenge this critique of the profession. Specifically, we allow for alternative opportunity cost accounting methodologies—one of which is derived from the term's definition as found in Ferraro and Taylor— and rely on the conventional relationship between willingness to pay and substitute goods to demonstrate that every answer to the multiple‐choice question is defensible. The Ferraro and Taylor survey question suggests difficulties in framing an opportunity cost accounting question, as well as a lack of coordination in opportunity cost accounting methodology. In scope and logic, we conclude that the survey question does not, however, succeed in measuring professional understanding of opportunity cost. A discussion follows as to the concept's appropriate role in the classroom.

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Ethics in Business

Petrochilos¹

2004

Managerial Economics

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The Scope and Method of Political Economy in the Light of the "Marginal" Theory of Value and of Distribution

Cited by 69 publications

References 0 publications

Economic calculation and transaction costs: The case of the airline oversales auction system

Economic calculation and transaction costs: The case of the airline oversales auction system

Do Economists Recognize an Opportunity Cost When They See One? A Dismal Performance or an Arbitrary Concept?

Ethics in Business

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