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  1. 1 Kozgazdasagi Szemle (Economic Review)

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  1. 1 Zalai E.

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Technical and economic efficiency in Koopmans' theory of production

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Zalai E.
Kozgazdasagi Szemle (Economic Review)
|
2008
|
vol. 55
|
issue 1
3-34
EN
Generalizing from his experience in solving practical problems, Koopmans set about devising a linear model for analysing activity. Surprisingly, he found that economics at that time possessed no uniform, sufficiently exact theory of production or system of concepts for it. He set out in a pioneering study to provide a theoretical framework for a linear model for analysing activity by expressing first the axiomatic bases of production theory, which rest on the concept of technological sets. He is associated with exact definition of the concept of production efficiency and efficiency prices, and confirmation of their relation as mutual postulates within the linear model of activity analysis. Koopmans saw the present, purely technical definition of efficiency as a special case; he aimed to introduce and analyse the concept of economic efficiency. The study uses the duality precepts of linear programming to reconstruct the results for the latter. It is shown first that evidence confirming the duality precepts of linear programming is equal in value, and secondly that efficiency prices are really shadow prices in today's sense. Furthermore, the model for the interpretation of economic efficiency can be seen as a direct predecessor of the Arrow-Debreu-McKenzie models of general equilibrium theory, as it contained almost every essential element and concept of them - equilibrium prices are nothing other than Koopmans' efficiency prices. Finally Koopmans' model is reinterpreted as a necessary tool for microeconomic description of enterprise technology
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