
Contents
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4.1 Introduction 4.1 Introduction
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4.2 The Economic World 4.2 The Economic World
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4.3 Orthodox Microeconomic Analysis 4.3 Orthodox Microeconomic Analysis
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4.3.1 Demand and Supply 4.3.1 Demand and Supply
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4.3.1.1 Demand theory 4.3.1.1 Demand theory
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4.3.1.2 Supply Theory 4.3.1.2 Supply Theory
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4.3.1.3 The Market as the Meeting Point of Supply and Demand 4.3.1.3 The Market as the Meeting Point of Supply and Demand
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4.3.2 Perfect Competition 4.3.2 Perfect Competition
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4.3.3 Non-Individual Goods and Externalities 4.3.3 Non-Individual Goods and Externalities
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4.3.3.1 Merit Goods 4.3.3.1 Merit Goods
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4.3.3.2 Externalities 4.3.3.2 Externalities
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4.3.4 Towards a More Realistic Analysis of the Economic World 4.3.4 Towards a More Realistic Analysis of the Economic World
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4.3.5 Imperfectly Competitive Market Structures 4.3.5 Imperfectly Competitive Market Structures
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4.3.5.1 Oligopoly 4.3.5.1 Oligopoly
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4.3.5.2 Monopoly 4.3.5.2 Monopoly
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4.3.5.3 Monopsony 4.3.5.3 Monopsony
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4.3.5.4 Bilateral Monopoly 4.3.5.4 Bilateral Monopoly
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4.4 New Institutional Economics 4.4 New Institutional Economics
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4.4.1 Introduction 4.4.1 Introduction
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4.4.2 Property Rights 4.4.2 Property Rights
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4.4.3 The Market as an Institution 4.4.3 The Market as an Institution
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4.4.4 Governance Structures 4.4.4 Governance Structures
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4.4.5 The Revival of OIE 4.4.5 The Revival of OIE
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4.5 Public Choice 4.5 Public Choice
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4.5.1 Introduction 4.5.1 Introduction
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4.5.2 Direct Democracy 4.5.2 Direct Democracy
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4.5.3 Representative Democracy 4.5.3 Representative Democracy
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4.5.4. Bureaucracy 4.5.4. Bureaucracy
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4.5.5 Interest Groups 4.5.5 Interest Groups
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4.5.6 Imperfectly Informed Actors in the Public World 4.5.6 Imperfectly Informed Actors in the Public World
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4.5.7 New Political Macro Economy 4.5.7 New Political Macro Economy
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Cite
Abstract
Orthodox economics is built on four axioms. Humans are supposed to be economic, rational, and non-social beings, and the real world is closed and determined by a few natural forces and motivations. Humans live in the so-called economic world, which is ruled by a number of economic laws. In the simplest case there is perfect competition on markets, but the nine assumptions which constitute this concept can be relaxed to create a more realistic economic world. New institutional economics is discussed to see what kind of institutions—conceptualized as cost-saving devices—belong to the economic world. Property rights, markets, and other governance structures are examples of economic institutions. Public choice, being the orthodox economics of the public world, is presented as well. Democracy, bureaucracy, and the role of pressure groups are discussed. Attempts to apply orthodox analysis to the empirical private and public world mostly fail.
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