A large and increasing share of economic activity in modern rich economies can be shown to lie outside what mainstream neoclassical economics itself says it can be applied to: according to neoclassical economics, such activities are unsuited to markets. Since World War II rich economies have de-industrialised, shifted to services. Since the 1970s neoclassical economics has come to dominate policy advice. This worldview justifies state interventions when there is remediable market failure, but it ignores irremediable market failure, where its theory says that markets cannot work efficiently (such as where there is joint production or own consumption). Servicisation, this article argues, has increased and is increasing the extent to which neoclassical economics is, in its own terms, ‘knowably ignorant’. This is because, where service provision is subject to irremediable market failure, neoclassical economics, in its own terms, is inapplicable. The GDP [Gross Domestic Product] share of sub-sectors serving diverse human needs, such as aged care and education, is large and rising. Such sub-sectors are dominated by joint production, manifest as diverse outputs (complex and inter-related changes in the welfare of their diverse clients). Setting aside questions of the wider ‘scientific’ validity of neoclassical theory, the article focuses on its assertion that markets cannot generate economically efficient outcomes in such activities. Arguing that the constrained optimisation of its conceptual world cannot happen in the case of joint production and own consumption of service outputs, neoclassical theory reports itself as unable to determine optimal resource allocation, and so by implication cannot fulfil its role as the foundational basis of state economic policy. Yet the literature shows that the coverage of this theoretical result is not publicised – it is ‘knowable’ but not widely known. The article concludes that, as neoclassical economics is foundational to contemporary state policy, both GDP data and neoclassical theory show that it, and markets, are knowably and increasingly inapplicable. Therefore, mainstream policy thinking continues to face an increasing ‘state of ignorance’, and the cognitive foundations of state policy are correspondingly weak.

We investigate the sectoral and the distributional effects of a food subsidy program, where food consumption in the economy is subsidized by taxing the manufacturing good producers. In a two-agent model comprising of farmer and industrialist households, agents consume food to accumulate health. Simulations indicate that while the subsidy program increases food output and agents’ health both in the short run and the long run, manufacturing output and aggregate real GDP appear to fall in the short run and increase only in the long run. The program does not make both agents better off and exhibits social welfare gains for a limited range of subsidies.

The Great Plains is the most important wheat producing region in the United States. Dwindling returns and changes in government farm programs have reduced wheat acreage, raising concerns over its future viability. Small farms and marginal areas are particularly vulnerable, including the western Great Plains (WGP). To assess the technical and economic viability of wheat farms, the efficiency of 141 wheat farms in the WGP was estimated. Results found substantial inefficiency among all producer types. The largest source of inefficiency was input use among smaller farms. The smaller farms were the most scale efficient, reducing concerns over their future viability.

This paper points out the problems of the current law on directors’ duties that forces directors to ignore stakeholder interests, with the unintended consequences of misallocation of resources and the weaknesses of a traditional legal approach to law reform, and uses multiple stakeholder boards as an example to demonstrate how an economic efficiency approach to law reform, adopting economic principles, could avoid some of the unintended consequences of a legal approach to law reform and help design better rules that promote allocative efficiency for the benefit of society as a whole. It argues that international organizations should take the lead in promoting the use of stakeholder directors in the board of directors of multinational corporations that have a history of corporate abuses for corporate decisions that have an impact on all stakeholders.

The purpose of this paper is to illustrate – in an argumentative style – that once we refrain from the usual neoclassical assumptions and integrate transaction costs, imperfect foresight and bounded rationality into present neoclassical (spot and futures) market theory, we get a more realistic perception of the decentralisation of intertemporal economic decision making. The failure of most futures markets for goods and services is compensated by firms (‘hierarchies’), which are led by entrepreneurs in the sense of Knight (1921) who may be seen as surrogate forward traders of goods and services. We claim that the ‘more realistic assumptions’ of New Institutional Economics, inter alia, provide a better perception of what takes place behind the veil of ‘money and finance’ than neoclassical economics, and why it makes sense to occasionally limit liability and, as a consequence, apply forms of private or public regulation. It might also help to explain some aspects of the financial crisis of 2008.