1st Edition

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

By Mateusz Machaj Copyright 2021
    112 Pages 3 B/W Illustrations
    by Routledge

    112 Pages 3 B/W Illustrations
    by Routledge

    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.


    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




    Mateusz Machaj is a Researcher at the University of New York in Prague and 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.