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Five basic principles of microeconomics
Microeconomics ("microeconomics" is a free translation of the Greek word "μ ι κ ρ ο", which means "small") is also called microeconomics. Microeconomics is a branch of modern economics, which mainly focuses on a single economic unit (single producer, single consumer and single market economic activity).

Microeconomics is an economic theory that studies the economic behavior of a single economic unit in society and how to determine the individual value of the corresponding economic variables. Analyze the economic behavior of individual economic units, on this basis, study the operation of market mechanism and its role in the allocation of economic resources in modern western economic society, and put forward microeconomic policies to correct market failure; Paying attention to the exchange process between individuals and organizations in society, its basic problem is the decision of resource allocation, and its basic theory is the theory of determining relative prices through supply and demand. Therefore, the main scope of microeconomics includes consumer choice, supplier supply and income distribution.

Research content editing

Microeconomics includes a wide range of contents, including: equilibrium price theory, consumer behavior theory, producer behavior theory (including production theory, cost theory and market equilibrium theory), distribution theory, general equilibrium theory and welfare economics, market failure and microeconomic policy.

Research direction of microeconomics: microeconomics studies the economic behavior of individuals in the market, that is, the economic behavior of a single family, a single manufacturer and a single market and the corresponding economic variables.

Based on the basic concept of scarcity of resources, it holds that all individual codes of conduct try to make the best use of limited resources here, and thus examine the conditions for individuals to obtain the best benefits. In the market of goods and services, families, as consumers, make choices according to the different prices of various commodities, trying to get the greatest utility or satisfaction from the quantity of various commodities purchased with limited income. Family's choice of goods will inevitably affect the price of goods, and the change of market price is the signal that manufacturers decide what kind of goods to produce. Manufacturers are suppliers of all kinds of goods and services, and the purpose of manufacturers is how to produce the largest number of products at the lowest production cost and get the maximum profit. The choice of manufacturers will affect the price of factor market, thus affecting the income of families. The choice of families and manufacturers is manifested through the relationship between supply and demand in the market and coordinated through price changes.

Therefore, the task of microeconomics is to study the market mechanism and its function, balance the decision of price, and examine how the market mechanism can obtain the conditions and ways of optimal allocation of resources by regulating individual behavior. Microeconomics is a market mechanism economics with price as the analysis center, so it is also called price theory. Microeconomics also examines the theoretical basis of how the government takes intervention actions and measures when the market mechanism fails. Microeconomics is gradually established on the basis of Marshall's equilibrium price theory, absorbing the monopoly competition theory of American economist Chamberlain and British economist Robinson. After the prevalence of Keynesian macroeconomics, this traditional theory that pays attention to individual economic behavior is called microeconomics. Microeconomics and macroeconomics only have the division of research objects, and there is no fundamental difference in positions, viewpoints and methods. Both use equilibrium analysis and marginal analysis. Theoretically, they complement each other and depend on each other, which together constitute the theoretical system of modern western economics.

The basic assumption of microeconomics: the market is clear, that is, there are no obstacles to the flow of resources; Completely rational, that is, both consumers and manufacturers are self-interested economic men, who consciously act according to the principle of maximizing interests, not only aiming at maximizing, but also knowing how to achieve it; Complete information means that consumers and manufacturers can get all kinds of market information freely and quickly.

Build development editor

The historical origin of microeconomics can be traced back to Adam Smith's The Wealth of Nations and alfred marshall's Principles of Economics. After 1930s, Robinson of Britain and Chamberlain of America put forward the theory of enterprise equilibrium on the basis of Marshall's equilibrium price theory. It marks the final establishment of microeconomic system, including: equilibrium price theory, consumption economics, productivity economics, manufacturer equilibrium theory and welfare economics.

The development of microeconomics has gone through four stages:

The first stage: from the middle of17th century to the middle of19th century, it is the early microeconomics stage, or the embryonic stage of microeconomics.

The second stage:1From the late 9th century to the early 20th century, it is the stage of neoclassical economics and microeconomics.

The third stage: from 1930s to 1960s, it was the completion stage of microeconomics.

The fourth stage: from the 1960s to the present, it is the stage of further development, expansion and evolution of microeconomics.

Throughout the development process and all theories of microeconomics, it is always analyzed around the core issue of price, so microeconomics is also called "price theory and its application" on many occasions. [ 1]

Theoretical development editor

New consumption theory

The construction of consumer behavior in traditional western microeconomics is based on the assumption of maximizing consumer utility. The development of consumption theory research stems from the reflection on this premise.

1. Display preference theory.

The theory of display preference was first put forward by Samuelson, then supplemented by Houthakker and Richter, and gradually became a system. Its appearance stems from the imperceptible utility of traditional demand theory. In the traditional micro-demand theory, the choice behavior of maximizing consumer utility is easy to analyze only when the consumer utility function is known and has good properties. But this is not the case in real life, because the utility or preference can not be directly observed, but only the consumer's choice behavior can be directly observed. If we can find some relationship between choice behavior and preference, and then if consumers' "choice" can show "preference", then demand theory and preference theory can be based on observable consumer behavior, which makes it possible to test the consistency between consumer behavior and maximization axiom. This is the basic idea of display preference theory.

2. Choice under risk conditions.

In the market with a lot of risks, how to effectively choose the combination of asset symptoms to avoid risks becomes very important. Therefore, the research on insurance market, securities market and futures contract has become a very active branch of microeconomic theory. Especially since 1960s and 1970s, with the development of cognitive psychology and other branches of psychology, people began to test the rational hypothesis and expected utility theory of classical economics. The results show that the rational axiom hypothesis is established under certain conditions, and people's behavior often violates the public rational hypothesis under vague or uncertain conditions. Therefore, when making decisions under uncertain conditions, we must examine people's complex mentality. In this case, there are wait-and-see theory, regret theory and fuzzy model. When it comes to portfolio decision-making in the market, there are risk asset theory (derivative securities), agency theory, portfolio selection theory, capital asset pricing model and arbitrage pricing theory. Corresponding to this theory is the intertemporal choice theory that explains consumers' different choices of consumption and savings under different conditions. Dynamic intertemporal selection theory has been widely used in modern economics.

3. Consumption is also the theory of family production.

Becker believes that the family is similar to a small factory, and it combines "resources, raw materials and labor … to produce some other useful goods". According to this broader view, consumers in neoclassical microeconomics are both family consumers and family producers, and they have dual roles. It is believed that the production and consumption of goods (in Becker's model, children are sometimes regarded as consumer goods) take time. Time is an opportunity cost, which must be calculated together with the market price of any goods or the act of making economic decisions. Just as raising children requires human resources, capital and time, the production and consumption of any final commodity or service can be regarded as a combination of various inputs needed to obtain an output. For example, a person's final product obtained in family production, such as "healthy body" (in the new microeconomic theory represented by Becker, consumption is regarded as family production), requires a combination of many "market goods" (goods directly purchased by consumers in the market) and time investment. Sports equipment, various healthy foods, medical services, and the time spent on sports and the time needed to consume these items are all inputs for the production of this final product. Individuals or families convert these inputs into outputs (including children's growth, comfortable family life, healthy body, spiritual pleasure, etc.). ), that is, the family's production or consumption process, embodies a production function.

Just as general production enterprises should consider the opportunity cost of applying production factors when optimizing production, so they should also consider the opportunity cost of applying various factors when optimizing family production. For example, watching a play, reading a book and eating a good meal all take time (these can be regarded as input factors in family production), so the full price of these behaviors must include the opportunity cost of the time spent on these behaviors. This opportunity cost can be measured according to the individual's market wage. For example, suppose someone can earn 10 dollars for an hour's work, and he will either eat in a restaurant for an hour or eat fast food for 15 minutes. Suppose the cost of these two dining methods is 6 yuan. Although the two meals need the same monetary cost, the full price they consume is obviously different. The full price of fast food consumption is $8.50 ($6 plus forgone income of $2.50), while the full price of dining in a restaurant is $65,438+06 ($6 plus forgone income of $65,438+00). The decisive factor of an individual's final choice will be the utility of each dollar spent on each meal (full cost) (that is, the value of products produced by the family). Other values of family production, such as having children, doing all kinds of housework and maintaining activities, can also be expressed by the concept of opportunity cost. Similarly, when time cost and market commodity cost are treated equally, the traditional choice between work and leisure is injected with new ideas and becomes the choice between work, leisure and family production. In addition, according to the concepts of quality and quantity, a new concept of household consumption type can be established.

New enterprise theory

Neo-classical enterprise theory studies an atomic enterprise, that is, it regards the enterprise as an economic individual with a tendency to maximize profits, in other words, it regards the enterprise as a "black box" and the smallest analysis unit, and all problems are abstracted in the production function. However, reality is far from theory, and the formation of modern enterprise theory is the result of reflection on this assumption.

1, enterprise nature. The essence of this problem is to analyze the reasons for the existence of enterprises. Coase was the first person to put forward and explain it. From the perspective of transaction cost analysis, Coase put forward that the existence of enterprises is to reduce market transaction costs, that is, the internalization of market costs. In addition to Coase, Williamson (1975), Klein (1978), Grossman and Hart (1986), Tirole and others explained the essence of enterprises from the perspectives of asset specificity, incomplete contract and vertical integration.

2. Maximization model and principal-agent problem. The principal-agent problem stems from the reflection and analysis of the maximization behavior of enterprise managers. In an enterprise, the separation of ownership and management rights is a problem that must be studied. Under normal circumstances, enterprise managers have exclusive decision-making power according to their specific information and power advantages, and their behavior has a great influence on enterprises. Therefore, in modern enterprises, there are differences in interests and goals between investors or customers and managers or agents. Principal-agent theory is developed to solve the problem that managers deviate from the goal of maximizing investors' profits. The significance of this theory lies in making enterprises no longer the smallest unit of economic analysis.

3. Internal organizational efficiency and non-maximization enterprise theory. How to stimulate the enthusiasm and creativity of employees and effectively organize various resources to make the enterprise run effectively is the core problem of enterprise form. The team theory of Aqin and HaroldDemsetz (1972) successfully explained this problem. From the perspective of management, neoclassicism "rational economic man" is the foothold of its management, that is, the "interest maximization incentive" of management. But in reality, this management idea is not always tried. In view of this situation, H. A. Simon assumed bounded rationality and pursued satisfactory utility, and H. Leibenstein put forward the "X- inefficiency theory", thus forming a non-maximized enterprise behavior theory. Its significance lies in analyzing and studying the efficiency of resource allocation and utilization from a "micro" perspective, which has become an important supplement to the "maximization theory".

Rewrite game theory

The market analysis of neoclassical economics has two important premises:

1, personal decision is the best choice under given price parameters and benefits, and does not affect others or depend on others;

2. The market information is sufficient and there is no cost.

These two premises make microeconomic analysis always in the wonderful realm of perfect general equilibrium deterministic analysis. However, this is not the case in real life. As a whole, the economy not only affects each other, but also has limited ability to obtain information, and information has a cost. It is in this case that game theory, information economics and uncertainty analysis came into being. Game Theory and Economic Behavior published by von Neumann and von Neumann (Morgan Stern) in 1944 marked the formal establishment of "economic game theory". By 1994, three "game theory" masters, Nash, Zelten and Halsani, all won the Nobel Prize in Economics [2], during which the game theory has been greatly enriched and developed for half a century. Theories such as zero-sum game and non-zero-sum game, prisoner's dilemma and Nash equilibrium, sub-game refined Nash equilibrium, Bayesian-Nash equilibrium and refined Bayesian-Nash equilibrium make game theory play an increasingly important role in modern economic analysis. In a sense, the extensive application of game theory has rewritten microeconomics.

Game theory reshapes the monopoly theory of microeconomics. Ignoring externalities is the fatal flaw of classical economics, so the study of externalities has greatly promoted the development of microeconomics. From Cournot, Bertrand to Chamberlain, economists have gradually realized that most of the market competition in reality needs to be explained by oligopoly theory. Although oligopoly competition is very common in reality, what economists can do before the introduction of game theory is to review Cournot's research results a century and a half ago. Only in the traditional industrial organization theory represented by Bain, the oligopoly market is taken as the focus, and the empirical research is carried out under the framework of "structure-behavior-performance". But when economists mastered Nash equilibrium and more knowledge of game theory, Cournot research was further promoted. They not only proved that Cournot and Bertrand equilibria are Nash equilibria, but also developed many analytical techniques based on these two models, such as sunk cost, incomplete information model, individual rationality and collective rationality, anonymity theorem and so on. The market analysis of modern economics has jumped to a new level.

Information economics has become the mainstream.

In the economic society, everyone makes decisions according to the information he has. But the asymmetric information environment is the norm. The so-called asymmetric information environment means that some people have information that others don't. Information economics studies the optimal decision-making of behavioral individuals under asymmetric information, mainly in two aspects: one is economic analysis under incomplete information, the core of which is "information cost" and optimal information search; The second is economic analysis under asymmetric information.

The difficulty of information economics lies in the uncertainty of the object in the principal-agent relationship, that is, the principal can't know exactly what kind of person he is dealing with when dealing with various agents, and so can the agents. At the end of 1960s, Hasani, a game theory scholar, put forward a game technology to deal with incomplete information, extended the concept of Nash equilibrium in complete information game to incomplete information game, and defined Bayesian Nash equilibrium [3]. On this basis, incomplete information games (especially asymmetric information games) have made rapid progress, and information economics has also developed rapidly. The analytical method of asymmetric information game has completely changed the whole picture of microeconomics. The moral hazard and adverse selection in the design and research of economic mechanism are all changes brought by this analysis method. It can be said that meticulous micro-analysis has penetrated into the complex economic system we live in-from the effectiveness of the market to the supply of public goods, from various related issues of the modern enterprise system to the role of the government in the economy and so on. Information economics has become the mainstream of economic analysis.

Method development and editing

The rapid development of western economics in the 20th century is also reflected in the great changes in its research methods and perspectives. The change of analytical methods has brought about the deepening and expansion of western economics research. It can be said that many "revolutions" and theoretical innovations in western economics in the 20th century largely benefited from the great changes in its research methods and perspectives. The change of methodology has played an important role in promoting the development of western economics in the 20th century, thus making it present distinctive characteristics of the times. The evolution of research methods even reflects the development of western economics in a sense.

Generalization of falsificationism

In the Methodology of Economics, Blauger summed up the evolution history of economic methods in the 20th century in one sentence: "Falsifier is the story of the whole 20th century" (Note: mark blaug: Methodology of Economics, Peking University Publishing House, 1990). )。 The dispute between falsificationism and positivism in the19th century also ran through the development of economics in the 20th century.

According to statistics, during the 20 years from 1970s to 1980s, western economists published more than 50 books on economic methodology, almost all of which were related to falsificationism. Among the 199 1 min * * obtained by contemporary western economists, 7 points are directly related to falsificationism. After positivism was "confirmed" by the real world, falsificationism came out to question it with facts and theoretical deduction, thus promoting the development of economics. [4]

Mathematical physics and chemical analysis tools

The combination of economics and mathematics did not begin in the 20th century, but since the war, the application of mathematics in economics has been so specialized, technical and professional, and even reached its peak, but it actually happened in the 20th century, which made the architecture of economics more rigorous, accurate and mature. Mathematicization has become the mainstream trend of economic development, mainly in the following three aspects.

First, the rise of econometrics. The term "econometrics" was put forward by the Norwegian economist Lager Frish in the 1920s (Note: Mary S Morgan, History of Economic Thought, new york: Cambridge University Press, 1990. ). Later, koopman, Klein and Dreub made great contributions, especially Klein, the winner of the Nobel Prize in Economics, put forward the earliest macroeconomic econometric model from 1950s, which opened up a new horizon for macroeconomic research. Since then, with the birth and use of large computers, various parameters of the economic structure have been calculated, providing a basis for formulating policies. It should be pointed out that Professor Klein has visited China many times since 1980s, and with the support of relevant state departments, he has trained the first batch of econometric research talents for China. The mathematical contribution of the first generation of econometricians has played a great role in the integrity, rigor and formalization of the economic methodology system, which is mainly reflected in the "macro" economic research, while the pioneering exploration in the "micro" economic research began with Becker, who first introduced econometric principles into areas that cannot be measured by mathematics, such as love, altruism, charity and religious piety, and achieved great success. But this is only part of the meaning. It can be said that for the previous econometrics, it seems more appropriate to call it "macro econometrics"-the analytical method of macro econometrics is one of the greatest contributions to economics in the 20th century. Fortunately, in the last year of the 20th century, that is, June 65438+1October 65438+1October 665438+1October 2000, the Academy of Sciences of the Royal Swedish Academy announced that the 2000 Nobel Prize in Economics was officially awarded to American professors James Heikman and Daniel McFadden. It can be said that this is the symbol of the formal birth of "micro-econometrics". The research field of microeconomics is mainly the microscopic data of cross-sectional data, that is, the situation of longitudinal data at the same time point or the same observation unit for many years. Micro-econometrics can conduct empirical research on many new issues at the individual level, such as what factors determine people to go to work, what factors determine the length of working hours, how economic incentive effects affect people's choices of education, occupation and residence, and what effects different labor markets and education plans will have on personal income and employment.

Second, the large-scale application of statistics in economics. Econometrics has made great progress in the 20th century and has become a fascinating branch of economics. Firstly, it benefited from the wide application of statistics in economics, and finally became an important basis for building an econometric system. For example, Friedman's American Monetary History 1867- 1960 is a classic work that successfully applied statistical analysis (Note: Mary S Morgan's History of Economic Thought, new york: Cambridge University Press, 1990). Through the statistical analysis of a series of data, he came to the conclusion that there is a close correlation between the long-term change of real money quantity and the long-term change of real income, thus constructing Freud's theory of money quantity. The application of statistical analysis not only supports the development of econometrics, but also promotes the birth and development of other related branches of economics. For example, Kuznets' classical research on seasonal fluctuation, long-term change of national income and economic growth not only established a solid position for statistical analysis, but also greatly promoted the division and development of new theories such as development economics, international economics, technological progress and industrial structure. [5]

The third is the introduction of game theory. As a brand-new research method, the application scope of game theory has been extended to politics, military affairs, diplomacy, international relations and criminology, but its application in economics is the most successful. Since 1980s, game theory has gradually become a part of mainstream economics, and even the foundation of microeconomics. Some people try to reconstruct the whole microeconomics with the language of game theory. The content of game theory research is mainly the decision-making and the balance of decision-making when the behaviors of decision-makers interact directly. With the help of game theory, a powerful analytical tool, "mechanism design", "principal-agent" and "contract theory" have been pushed to the forefront of contemporary economics.