A Market Process Theory of the Firm : An Alternative to the Neoclassical Model book cover
1st Edition

A Market Process Theory of the Firm
An Alternative to the Neoclassical Model

ISBN 9780367749248
Published July 15, 2021 by Routledge
112 Pages 3 B/W Illustrations

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Book Description

Neoclassical economics has been criticized from various angles by orthodox schools. The same can be said about its particular branch: the theory of the firm.

This book demonstrates how a successful theory of the firm can be presented without flawed notions of a neoclassical framework and used to comprehend actual business history. The author argues that we should start from the assumption that businesses are inevitably imponderable, as that is their nature, in the process of economic evolution. The book offers an in-depth exploration of neoclassical limitations by examining each of the small details associated with the famous MR = MC rule. It follows a step-by-step approach, which starts off with neoclassical assumptions and then moves into more empirically sound theory, based on modeling logic and rooted in real world examples. The author presents a novel discussion on the size of the firm, both in terms of classifying a firm’s expansion and about the factors that limit the size of the firm and argues how formal pricing theory can be built using more indeterminate assumptions about firms. Further, there is a discussion on how firms are rooted in amorphous industries, which helps to explain economic progress better by emphasizing the importance of economic experiments, mistakes and bankruptcies.

This is a valuable reference for scholars and researchers who are interested in a range of topics from microeconomics, through pricing theory to industrial organization, history of economic thought and managerial economics.

Table of Contents


Instead of an introduction

1. The neoclassical theory of the firm: its application and limitations

The fundamental law of neoclassical economics 6

The problem with MC curve: do the limitations apply to this side of firm’s activity?

The problem with the MC classification: are fixed costs significant only in the long run?

The problem with profit maximization: can it be considered the firm’s objective?

2. Theoretical imputation and real calculation

Value and imputed value

The law of costs and monetary imputation

Prices as information carriers in a heterogeneous world

Judgment, business decisions and ownership

3. The firm’s size and limitations

The firm’s size and expansion

The Nature of the Firm by Ronald Coase

Empirical barriers to business expansion

4. Imponderability of firms

Firms as value creators

Innovation and the firm

What are new things?

A firm is never constans

5. The organics of the industry and firms


Industries and diffusion of innovations

Market economy as evolutionary rationalizer

6. Firms’ mistakes and economic evolution

Legal and political factors

International factors

Technological factors

Internal factors (entrepreneurial and managerial)

Business history as a dead-end street?

Social perception and firms

Instead of Conclusions



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Mateusz Machaj is Associate Professor at the Institute of Economic Sciences, University of Wroclaw, Poland. He has published articles on various economic issues in journals such as Critical Review, American Journal of Economics and Sociology, Econ Journal Watch, Prague Economic Papers and Quarterly Journal of Austrian Economics. He is the author of the following monographs: Capitalism, Socialism and Property Rights: Why Market Socialism Cannot Substitute the Market; Money, Interest and the Structure of Production: Resolving Some Puzzles in the Theory of Capital; and a popular book The Rise and Fall of the First Galactic Empire: Star Wars and Political Philosophy.