Constant Returns to Scale: Can the Neoclassical Economy Exist Report as inadecuate




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Abstract

Constant returns to scale CRS is one of the corner-stones of the competitive general equilibrium paradigm of neoclassical economics. This note argues that the equilibrium solutions of this paradigm are not compatible with CRS. CRS implies that all producers whatever their scale of production can produce goods at the same unit costs: and this makes self-production a feasible alternative to market production. In the event, an infinite number of equilibria become possible with a mix of markets and self-production. If labor is the only factor of production, self-production becomes the only option: and the market economy ceases to exist.



Item Type: MPRA Paper -

Original Title: Constant Returns to Scale: Can the Neoclassical Economy Exist?-

Language: English-

Keywords: Constant returns to scale, competitive paradigm, neoclassical economics, second-best, Lipsey, Lancaster,Samuelson, Arrow, Debreu, Kaldor, Allyn Young, general equilibrium, increasing returns to scale, existence, uniqueness, equilibrium, classical economics, Adam Smith, Ricardo, Pareto-optimality, John Bates Clark, Wicksteed, Mirowski, Austrian-

Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B0 - GeneralB - History of Economic Thought, Methodology, and Heterodox Approaches > B0 - General > B00 - GeneralB - History of Economic Thought, Methodology, and Heterodox Approaches > B1 - History of Economic Thought through 1925B - History of Economic Thought, Methodology, and Heterodox Approaches > B3 - History of Economic Thought: IndividualsB - History of Economic Thought, Methodology, and Heterodox Approaches > B4 - Economic MethodologyB - History of Economic Thought, Methodology, and Heterodox Approaches > B4 - Economic Methodology > B41 - Economic MethodologyD - Microeconomics > D5 - General Equilibrium and Disequilibrium-





Author: Alam, M. Shahid

Source: https://mpra.ub.uni-muenchen.de/45153/







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