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EVOLUTION OF THOUGHT FOR PRODUCTION FUNCTION: FROM CLASSICAL ECONOMICS TO NON-PARAMETRIC FUNCTIONS

Year 2020, Volume: 2 Issue: 1, 117 - 131, 30.10.2020

Abstract

This paper tackles the evolution of thought regarding the production theory from classical to neoclassical era, reaching to its modern techniques in DEA (Data Envelopment Analysis). David Ricardo, with its seminal book, “On the Principles of Political Economy”, is a great example depicting the classical chain of thought of his time, while the famous Cobb-Douglas Function highlights the shift in economical thinking from “average” to “marginal” and from “macro to “micro” and from “labor focused” to “capital & labor”. Based on the footsteps of the neoclassical assumptions, Nonparametric approaches such as DEA evolve on the concept of producing a certain output level from the given input bundle, and derive their frontier from the given data with the defined technology. DEA literature on undesirable outputs extends by introducing solutions to well known issues, such as the relaxation of the “free-disposability” for certain outputs, along with the differentiation between weak and strong disposability, asymmetric treatment of bad and good outputs, and the use of shadow prices.

References

  • Charnes A, Cooper WW, Rhodes E. (1978), Measuring the efficiency of decision making units. European Journal of Operational Research;2(6):429–44.
  • Banker RD, Charnes A, Cooper, (1984), WW. Some models for estimating technical and scale inefficiencies in data envelopment analysis. Management Science; 30:1078–92.
  • Cobb, C. W., Douglas, P. H., (1928). A Theory of Production, The American Economic Review, Vol. 18, No. 1 (Mar.), pp. 139-165
  • Fare, Rolf, Shawna Grosskopf, C. A. Knox Lovell, and Carl Pasurka, (1989). Multilateral Productivity Comparisons When Some Outputs Are Undesirable: A Nonparametric Approach, The Review of Economics and Statistics, Vol. 71, No. 1 (Feb.), pp. 90-98
  • Fare, Rolf, Shawna Grosskopf, C. A. Knox Lovell, and Suthathip Yaisawarng (1993). Derivation of Shadow Prices for Undesirable Outputs: A Distance Function Approach, The Review of Economics and Statistics, Vol. 75, No. 2 (May), pp. 374-380
  • Farrell, M. J. (1957). The Measurement of Production Efficiency, Journal of the Royal Statistical Society. Series A (General), Vol. 120, No. 3, pp.253-290
  • Gerard Debreu (1951). The Coefficient of Resource Utilization, Econometrica, Vol. 19, No. 3 (Jul.), pp. 273-29
  • Koopmans, T. C. (1951). Analysis of Production as an Efficient Combination of Activities, Chapter III in Activity Analysis of Production and Allocation, Cowles Commission Monograph 13, T. C. Koopmans, ed., New York: John Wiley and Sons, pp. 33-97.
  • Kumbhakar, S., & Lovell, C. (2000). Stochastic Frontier Analysis. Cambridge: Cambridge University Press.
  • Meeusen, W. and Broeck, J. v. d. (1977). Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error, International Economic Review, vol. 18, issue 2, 435-44
  • Pareto, V. (1897). Cours d'gconomie politique, Lausanne, Vol. II, Paragraphs 720-735, 1.013-1.023.
  • Pittman, Russell W. (1981). Issues in Pollution Control: Interplant Cost Differences and Economies of Scale”, Land Economics 57, 1-17.
  • Pittman, Russell W. (1983). Multilateral Productivity Comparisons with Undesirable Outputs, Economic Journal 93 (372), 883-891.
  • Ray, S., Kumbhakar, S., Dua, P. (2015). Benchmarking for Performance Evaluation: A production frontier Approach. Springer
  • Ricardo, David, (1821), On the Principles of Political Economy and Taxation, 3 ed., McMaster University Archive for the History of Economic Thought.
  • Romer P., (1986). Increasing Returns and Long-run Growth, Journal of Political Economy, vol. 94, issue 5, 1002-37

KLASİK İKTİSATTAN NON-PARAMETRIK FONKİYONLARA, ÜRETİM FONKİYONUNA DAİR İKTİSADİ DÜŞÜNCENİN EVRİMİ

Year 2020, Volume: 2 Issue: 1, 117 - 131, 30.10.2020

Abstract

Bu makale, klasik iktisadi çagdan neo-klasik çağa, oradan da DEA (Veri Zarflama Analizi) gibi günümüzün modern non-parametrik tekniklerine uzanacak şekilde üretim fonksiyonunun ekonmik düşünce bazındaki evrimini ele almaktadır. David Ricardo, “On the Principles of Political Economy” adlı özgün çalışmasıyla, klasik iktisadi düşünce yapısını özetlerken, ünlü Cobb-Douglas Fonksiyonu, iktisadi anlayıştaki “ortalama”dan “marjinal”e, “makro”dan “mikro”ya, “emek”ten “emek ve sermaye”ye geçişi betimlemektedir. Neoklasik temeller üzerine bina edilen, DEA gibi non-parametrik yaklaşımlar, mevcut girdi sepeti ile belli bir çıktı seviyesi elde etmek ve eldeki veriler ile mevcut teknolojiye göre üretim sınırlarını türetmek üzere geliştirilmişlerdir. İstenmeyen çıktıları da içine alacak şekilde gelişen DEA literaturü, belli çıktılar için serbest atılabilirlik (free-disposability) varsayımının kaldırılabilmesi, hatta zayıf ve güçlü atılabilirlik (weak-strong disposability) kavramları ayrımı, kötü ve iyi çıktıların asimetrik ele alınması ve gölge fiyatların kullanımı ile bilinen birçok soruna çözüm bulmuştur.

References

  • Charnes A, Cooper WW, Rhodes E. (1978), Measuring the efficiency of decision making units. European Journal of Operational Research;2(6):429–44.
  • Banker RD, Charnes A, Cooper, (1984), WW. Some models for estimating technical and scale inefficiencies in data envelopment analysis. Management Science; 30:1078–92.
  • Cobb, C. W., Douglas, P. H., (1928). A Theory of Production, The American Economic Review, Vol. 18, No. 1 (Mar.), pp. 139-165
  • Fare, Rolf, Shawna Grosskopf, C. A. Knox Lovell, and Carl Pasurka, (1989). Multilateral Productivity Comparisons When Some Outputs Are Undesirable: A Nonparametric Approach, The Review of Economics and Statistics, Vol. 71, No. 1 (Feb.), pp. 90-98
  • Fare, Rolf, Shawna Grosskopf, C. A. Knox Lovell, and Suthathip Yaisawarng (1993). Derivation of Shadow Prices for Undesirable Outputs: A Distance Function Approach, The Review of Economics and Statistics, Vol. 75, No. 2 (May), pp. 374-380
  • Farrell, M. J. (1957). The Measurement of Production Efficiency, Journal of the Royal Statistical Society. Series A (General), Vol. 120, No. 3, pp.253-290
  • Gerard Debreu (1951). The Coefficient of Resource Utilization, Econometrica, Vol. 19, No. 3 (Jul.), pp. 273-29
  • Koopmans, T. C. (1951). Analysis of Production as an Efficient Combination of Activities, Chapter III in Activity Analysis of Production and Allocation, Cowles Commission Monograph 13, T. C. Koopmans, ed., New York: John Wiley and Sons, pp. 33-97.
  • Kumbhakar, S., & Lovell, C. (2000). Stochastic Frontier Analysis. Cambridge: Cambridge University Press.
  • Meeusen, W. and Broeck, J. v. d. (1977). Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error, International Economic Review, vol. 18, issue 2, 435-44
  • Pareto, V. (1897). Cours d'gconomie politique, Lausanne, Vol. II, Paragraphs 720-735, 1.013-1.023.
  • Pittman, Russell W. (1981). Issues in Pollution Control: Interplant Cost Differences and Economies of Scale”, Land Economics 57, 1-17.
  • Pittman, Russell W. (1983). Multilateral Productivity Comparisons with Undesirable Outputs, Economic Journal 93 (372), 883-891.
  • Ray, S., Kumbhakar, S., Dua, P. (2015). Benchmarking for Performance Evaluation: A production frontier Approach. Springer
  • Ricardo, David, (1821), On the Principles of Political Economy and Taxation, 3 ed., McMaster University Archive for the History of Economic Thought.
  • Romer P., (1986). Increasing Returns and Long-run Growth, Journal of Political Economy, vol. 94, issue 5, 1002-37
There are 16 citations in total.

Details

Primary Language English
Journal Section Articles
Authors

Can Bekaroğlu 0000-0002-4033-1897

Publication Date October 30, 2020
Submission Date June 15, 2020
Acceptance Date September 6, 2020
Published in Issue Year 2020 Volume: 2 Issue: 1

Cite

APA Bekaroğlu, C. (2020). EVOLUTION OF THOUGHT FOR PRODUCTION FUNCTION: FROM CLASSICAL ECONOMICS TO NON-PARAMETRIC FUNCTIONS. Management and Political Sciences Review, 2(1), 117-131.


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