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Cost and Choice

An Inquiry in Economic Theory

"As he usually does, Professor Buchanan has produced an interesting and provocative piece of work. [Cost and Choice] starts off as an essay in the history of cost theory; the central ideas of the book are traced to Davenport and Knight in the United States, and to a series of distinguished writers associated at various times with the London School of Economics. The author emerges from this discussion with what can be described as the ultimate in subjectivist cost doctrines. . . . Economists should learn the lessons offered to us in this little book—and learn them well. It can save them from serious errors."—William J. Baumol, Journal of Economic Literature

120 pages | 6 x 9 | © 1979

Economics and Business: Economics--General Theory and Principles

Table of Contents

1. Cost in Economic Theory
Classical Economics
Marginal-Utility Economics
The Marshallian Synthesis
Frank Knight and American Neoclassical Programs
2. The Origins and Development of a London Tradition
Wicksteed and the Calculus of Choice
H. J. Davenport
Knight on Cost as Valuation
Robbins, 1934
Mises, Robbins, and Hayek on Calculation in a Socialist Economy
Hayek, Mises, and Subjectivist Economics
The Practical Relevance of Opportunity Cost: Coase, 1938
G. F. Thirlby and "The Ruler"
Mises’ Human Action
The Death of a Tradition?
Appendix to Chapter 2: Shackle on Decision
3. Cost and Choice
The Predictive Science of Economics
Cost in the Predictive Theory
Cost in a Theory of Choice
Choice-Influencing and Choice-Influenced Cost
Opportunity Cost and Real Cost
The Subjectivity of Sunk Costs
Cost and Equilibrium
4. The Cost of Public Goods
The Theory of Tax Incidence
Costs and Fiscal Decision-Making: The Democratic Model
Costs and Decision-Making: The Authoritarian Model
Costs and Decision-Making: Mixed Models
The Choice Among Projects
The Costs of Debt-Financed Public Goods
Ricardo’s Equivalence Theorem
Tax Capitalization
5. Private and Social Cost
Summary Analysis
A Closer Look
Internal Costs, Equilibrium, and Quasi-Rents
An Illustrative Example
Pigovian Economics and Christian Ethics
Narrow Self-Interest and Alternative-Opportunity Quasi-Rents
6. Cost Without Markets
Prices, Costs, and Market Equilibrium
Resource Services Prices as Final Product Costs
Market Equilibrium, Costs, and Quasi-Rents
The Cost of Military Manpower: An Example
The Cost of Crime: Another Example
Artificial Choice-Making
Socialist Calculation and Socialist Choice
Costs in Bureaucratic Choice

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