By Wei-Bin Zhang

This ebook constructs an fiscal concept that may be studied just like the I Ching: it includes a number of styles inside of a grand complete; it involves a number of elements and every half represents itself as a constant cohesion. The publication is the major a part of my financial concept with endogenous inhabitants, capital, wisdom, personal tastes, sexual department of work and intake, associations, fiscal constructions and trade values over the years and area (Zhang, I 996a). It has taken me an extended hard method to systematize the tips represented during this ebook: formulating the grand imaginative and prescient in Schumpeter's feel, trying to find or growing many rules, of which just a couple of have 'survived', and now finishing this booklet to make a inform. I take into accout Schumpeter's angle: new rules, except conscientiously elaborated, panistakingly defended, and 'pushed', easily won't inform (Schumpeter, 1934), Keynes' remark: the trouble lies, now not within the new principles, yet in escaping from the previous ones, which ramifY . . . . into each comer of our minds (Keynes, 1936), in addition to Confucius' acceptance of the significance oftiming: If my p'rinciples are to develop, it's so ordered. in the event that they are to fall to the ground,it is so ordereo. (Confucius, 1992). Acknowledgements I accomplished this e-book on the Swedish Institute for Futures experiences. i'm thankful to the friendly and potent surroundings· produced by means of the employees of the Institute. I recognize my deep appreciation to Professor Ake E. Andersson, my manager of Ph. D.

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The engineering economist may develop some good ideas about describing 'engineering aspects of production processes'. It is a different matter to introduce such production functions into an economic framework, being consistent with the rest of the system. Production is generally described as combination of multiple production factors such as natural resources, labor, knowledge, and capital. For simplicity this section assumes that there are only two productive factors, capital K (I) and labor N (I) at each point of time 1 .

It is worthwhile to remark that if a production function F( x p"" number of inputs xm ) with any {x j }, is homogenous of degree one and each factor is paid according to the neoclassical rule (the price being equal to the marginal product), then the adding-up requirement is satisfied. This can be proved by applying Euler's Theory to F. j x-=nF. J a. J If n = 1 and the price of X j is equal to requirement is satisfied. If BF / ax. j for any j, the adding-up n > 1 and the price of x j is equal to BF / ax.

A utility function for the preference relation ~, if, for any two points X and X ~t' Y at point of time y, ut (x) ~ ut (y) iff t. It seems that Pareto was the first to recognize that arbitrary increasing transformation of a given function would result in identical maximization of a consumer. From the above defmition we see that for any utility function ut and any increasing transformation f: R ~ R the function vt the same preference relation and Rader (1963). ~. t. , a preference relation which satisfies Axioms 1-4.

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