What does the neoclassical model focus on?

1.2 Qualifications Concerning the Neoclassical Theory

The model that postulates workplace safety results from risk premiums that provide financial incentives to employers to invest in safety has been challenged. Some critics assert that risk premiums are inadequate because workers lack sufficient information about the risks of work injuries and/or have limited mobility to move to less hazardous jobs. Ehrenberg and Smith (1996) conclude that workers have enough knowledge to form accurate judgments about the relative risks of various jobs. However, Viscusi (1993) refers to a sizable literature in psychology and economics documenting that individuals tend to overestimate low probability events, such as workplace injuries, which could result in inappropriately large risk premiums. Both Ehrenberg and Smith (1996) and Viscusi (1993) argue there is sufficient worker mobility to generate risk premiums. Another challenger to the neoclassical model is Ackerman (1988), who argues that the labor market does not generate proper risk premiums because certain costs resulting from work injuries are not borne by workers but are externalized.

The empirical evidence on risk premiums has also been challenged or qualified. Ehrenberg and Smith (1996), for example, conclude that the studies of compensating wage differentials for the risks of injury or death on the job ‘are generally, but not completely, supportive of the theory.’ Viscusi (1993) concludes: ‘The wage-risk relationship is not as robust as is, for example, the effect of education on wages.’

The most telling attack on the compensating wage differential evidence is by Dorman and Hagstrom (1998), who argue that most studies have been specified improperly. They find that, after controlling for industry-level factors, the only evidence for positive compensating wage differential pertains to unionized workers. For nonunion workers, they argue that properly specified regressions suggest that workers in dangerous jobs are likely to be paid less than equivalent workers in safer jobs.

The Dorman and Hagstrom challenge to the previously generally accepted view—that dangerous work results in risks premiums for most workers—is likely to result in new empirical studies attempting to resuscitate the notion of risk premiums. However, even if every empirical study finds a risk premium for workplace fatalities and injuries, the evidence would not conclusively validate the neoclassical economics approach. Ehrenberg (1988) provides the necessary qualification: if there are any market imperfections (such as lack of information or mobility), the ‘mere existence of some wage differential does not imply that it is a fully compensating one.’ And if the risk premium is not fully compensating (or is more than fully compensating), then inter alia, the market does not provide the proper incentive to employers to invest in safety.

Another qualification concerning the use of risk premiums as a stimulus to safety is that institutional features in a country's labor market may aid or impede the generation of risk premiums. In the US, the relative lack of government regulation of the labor market and the relative weakness of unions probably facilitate the generation of risk premiums. In countries like Germany, where unions are relatively strong and apparently opposed to wage premiums for risks, and where labor markets appear to be less flexible than those in the US because of government regulation of the labor market, wages are less likely to reflect underlying market forces that produce risk premiums.

1.3.3.1 Economics literature on identity

Within the literature on identity, the approach of Akerlof and Kranton [AKE 00] extends the neoclassical analysis by including social categories. The approach of Sen [SEN 02] and of Kirman and Teschel [KIR 06a] departs from this analytical framework and proposes alternatives based on limited rationality. Davis’s approach [DAV 10] is more theoretical and philosophical, as it does not claim to analyze an equilibrium between economic agents. Finally, Castronova [CAS 03] is the only article to deal with the notion of online digital identity. It explicitly acknowledges the multiple identities associated with a single individual.

1 Boserup's Theoretical Contributions

Boserup's work reflects her background in classical and neoclassical economics. In 1936, she began building her analysis with a comparison of Marx's theory of underconsumption and Keynes's theory of propensity to consume (1999). Boserup established her reputation as a researcher with The Conditions of Agricultural Growth in the mid-1960s. Her main thesis in this work is that technological change and property rights are endogenous. The book was published at a time when growth theory was dominated by neoclassical models that treated technology as exogenous. Boserup hypothesized that increasing population density led to transformation of the environment and introduction of new technology, in particular in a change of agricultural systems from shifting (slash and burn) techniques to use of the plow and irrigation. This view countered the Malthusian and neo-Malthusian positions on population growth that took the carrying capacity of the earth and technology as given and predicted that continued population growth would lead to soaring prices for grain, wars, disease, and at best a return to subsistence survival for most people.

While Boserup's analysis was a bold break with much of the received wisdom of the time, it still contained elements of the linearity present in the works of writers like Marx and Rostow and implicitly posited a view of development as progress from family production to modernity characterized by labor specialization and monetization of the economy. Statements that Boserup made at times in her writing demonstrate that her views were more complex; she noted, for example, that reversals can occur such as the fall of the Roman Empire (1999). The complexity, however, showed up more consistently in her multidisciplinary, dynamic approach rather than in addressing issues of non-linearity and variety in development processes. Although there are differences in current views about what motivates technological change, the conceptualization of technology as endogenous has been a significant contribution to development theory. It is the basis of much of the new growth theory of the 1980s and 1990s, but new growth theorists are more likely to explain the technological adaptation in terms of human capital and positive externalities rather than population pressure.

Her book on agricultural growth gave Boserup the credentials in the academic community necessary to stir interest in her next major work, Woman's Role in Economic Development (1970). The timing was also good since activism among women was growing and interest in changing public policy was increasing among men and women. Boserup brought gender into development analysis as an integral factor that has remained central to much subsequent development work. She pointed out that both colonialism and modern development programs had frequently marginalized women from rights that they previously had.

She brought in her ideas from the agricultural growth book to identify shifting agriculture with low population density, tools such as the hoe, common property, and women taking an active role in subsistence farming. This system, common in Africa, she identified as a female farming system. She contrasted this with the system often found in more densely-populated Asia of plowed fields, irrigated crops, and private property, which she termed a male farming system. She noted that the gender roles in economic activity were distinct in all the societies she studied and although considered ‘natural’ by members of each group, they varied across cultures—illustrating that the gender roles were constructed socially rather than biological. Despite her awareness of these variations in occupation and time use by gender, Boserup focused on constructing a general view and downplayed the variation among agricultural systems. She stated that the agricultural system would tend to progress from the female farming, shifting system to the male farming, plowed system as population density increased. Continuing growth of population would lead to more intensive farming of irrigated land by both women and men (a mixed system) (1970). Much of the research that had focused on women and gender at that time had been done by anthropologists who frequently use in-depth case studies as a methodological approach. As a trained economist, Boserup used the approach of collecting large amounts of data on the roles of women and men from many countries (mainly in sub-Saharan Africa and South/Southeast Asia) and making inferences—thus, the 268 tables in her book.

4 Methods for IA

The methodological approaches used at this time to do IA are relatively immature. In general, two types of methods can be distinguished: analytical methods and participatory methods. While analytical methods are often rooted in natural sciences, participatory methods stem from social sciences. The group of analytical methods is reasonably well defined and basically includes model analysis, scenario analysis, and risk analysis. Their commonality is that they provide analytical frameworks for representing and structuring scientific knowledge in an integrated manner. A plethora of participatory methods, however, exist, varying from expert panels and delphi methods, to gaming, policy exercises and focus groups. They have in common the aim to involve nonscientists as stakeholders in the process, where the assessment effort is driven by stakeholder–scientist interactions. Here, we will only briefly discuss IA models and IA participatory approaches. For a comprehensive and elaborative description of IA methods, refer to Rotmans (1998).

Economic Approaches: Neoclassical vs. Bargaining

In economics, two competing paradigms have been established to explain how the division of household labor is determined. Neoclassical economic theory, especially as exemplified by Gary Becker's work, argues that the partner with comparative advantage in the market (for example, the higher wage rate) will specialize in paid work and the other partner will specialize in housework, in order to maximize shared unitary utility. In sharp contrast to the assumption of unitary utility of the family members, a group of economic models has adopted the bargaining approach; developed by John F. Nash, this model states that the division of household labor is the result of bargaining between spouses who have separate and even conflicting interests. According to bargaining models, the person who has a bargaining advantage (normally the one who has more resources outside the marriage/cohabitation) will specialize less in housework.

Until the early 1990s, most economists treated the household as one economic unit in which family members behave as if they share one common utility, or at least as if they agree on every economic activity. This “common preference” (or unitary utility of the couple) is guaranteed by consensus or altruism. Different terms are used to describe this approach: neoclassical model, common preference model, unitary model, or consensus model. The approach has gained popularity based on typical economic consumption data that are usually reported at the household level. It has also allowed economists to analyze household data with relative ease by putting aside the theoretical task of showing how individual preferences are aggregated at the collective household level (the so-called preference aggregation problem). Becker provided the seminal theoretical basis for this approach: as a possible mechanism to ensure the unitary utility of the household, he paid attention to “care.” In his well-known “rotten-kid” theorem, he proved that even if only one of the members is taking care of meeting the needs of the others, so that his/her preference depends on the others' utility function, every family member (including a rotten kid) would try to maximize the joint family utility. Now, under the assumption that couples try to maximize their shared consumption in the household, Becker proved that no more than one family member would specialize in both market work and household work if all family members have different comparative advantages. Please note that the theorem is valid no matter what family members' income levels are. Even if both spouses have high income from paid work, there will be still positive gains from specialization as long as it is based on comparative advantage and their goal is to maximize their unitary utility. In conclusion, under the neoclassical approach, the person with a comparative advantage in the market will allocate time mainly to the market sector and the other will spend time mainly on housework, thus maximizing their shared utility (or aggregate consumption).

Although Becker avoids the preference aggregation problem by assuming “caring” (or altruism), the issue over who has the last word (or ultimate power) in the household is not solved. A caring person (or a parent) must have the ultimate power in the household in order that the rotten kid theorem is valid. It disregards the fact that the family is also often the place for conflict and struggle. In economics, many different approaches have been developed to treat the family as a collection of individuals with different utilities and to show how the aggregated outcome emerges from different and even conflicting utilities. As one major approach, bargaining models assuming a cooperative game between two persons have been proposed for the intrahousehold division of labor and thus the division of household labor is the result of bargaining between two persons with separate utility. As the solution of the basic Nash bargaining model expects, a higher threat point (i.e., the minimum welfare level if no agreement can be reached between the players, divorce or break up being the payoff in this case) always decreases housework and increases paid work. There have been several efforts to elaborate the Nash bargaining model—for example, by replacing an external threat point with an internal one. Such efforts attempt to explain intrahousehold decisions without relying on the assumption of a single household utility function. In sum, according to bargaining models, a person with a higher threat point will specialize in paid work and the other person with a lower threat point will specialize in housework.

Many empirical results have challenged the unitary utility argument, especially by showing that family members do not appear to pool their income. But most empirical results can be interpreted in accord with both camps, and thus cannot be judged as conclusive rejections of the neoclassical approach. However, many now believe that the burden of proof should be shifted onto those who argue for the unitary utility of the family.

What is the main concept of neoclassical?

What is neoclassical model theory?

What are the main features of the neoclassical approach?

What are three principles of neoclassical?