Consumers often choose not directly from the commodities that they purchase but from commodities they transform into goods through a household production function . It is these goods that they value. The idea was originally proposed by Gary Becker, Kelvin Lancaster, and Richard Muth in the mid-1960s. [1] The idea was introduced simultaneously into macroeconomics in two separate papers by Jess Benhabib, Richard Rogerson, and Randall Wright (1991); [2] and Jeremy Greenwood and Zvi Hercowitz (1991). [3] Household production theory has been used to explain the rise in married female labor-force participation over the course of the 20th century, as the result of labor-saving appliances. [4] More recently with the rise of the DIY or Maker movement household production has become more sophisticated. For example, consumers can now convert plastic wire into high-value products with inexpensive 3-D printers in their own homes. [5] [6]
A simple example of this is baking a cake. The consumer purchases flour, eggs, and sugar and then uses labor, know-how, time and other resources producing a cake. The consumer did not really want the flour, sugar, or eggs, but purchased them to produce the cake for consumption (instead of buying it, e.g., from a bakery).
Economics is the social science that studies how people interact with value; in particular, the production, distribution, and consumption of goods and services.
Microeconomics is a branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.
Gary Stanley Becker was an American economist who received the 1992 Nobel Memorial Prize in Economic Sciences. He was a professor of economics and sociology at the University of Chicago, and was a leader of the third generation of the Chicago school of economics.
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Agricultural economics is an applied field of economics concerned with the application of economic theory in optimizing the production and distribution of food and fiber. Agricultural economics began as a branch of economics that specifically dealt with land usage, it focused on maximizing the crop yield while maintaining a good soil ecosystem. Throughout the 20th century the discipline expanded and the current scope of the discipline is much broader. Agricultural economics today includes a variety of applied areas, having considerable overlap with conventional economics. Agricultural economists have made substantial contributions to research in economics, econometrics, development economics, and environmental economics. Agricultural economics influences food policy, agricultural policy, and environmental policy.
Kelvin John Lancaster was an Australian mathematical economist and John Bates Clark professor of economics at Columbia University. He is best known for the development of the Theory of the Second Best with Richard Lipsey. Lancaster was also active in developing the calculus of qualitative economics, formulating the household production function, and applying the hedonic model to the estimation of housing prices.
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The Quarterly Journal of Economics is a peer-reviewed academic journal published by the Oxford University Press for the Harvard University Department of Economics. Its current editors-in-chief are Pol Antràs, Robert J. Barro, Lawrence F. Katz, and Andrei Shleifer. It is the oldest professional journal of economics in the English language, and covers all aspects of the field—from the journal's traditional emphasis on microtheory, to both empirical and theoretical macroeconomics. According to the Journal Citation Reports, the journal has a 2015 impact factor of 6.662, ranking it first out of 347 journals in the category "Economics". It is generally regarded as one of the top 5 journals in economics, together with the American Economic Review, Econometrica, the Journal of Political Economy, and the Review of Economic Studies.
Arnold Carl Harberger is an American economist. His approach to the teaching and practice of economics is to emphasize the use of analytical tools that are directly applicable to real-world issues. His influence on academic economics is reflected in part by the widespread use of the term "Harberger triangle" to refer to the standard graphical depiction of the efficiency cost of distortions of competitive equilibrium. His influence on the practice of economic policy is manifested by the high positions attained in national agencies such as central banks and ministries of finance, and in international agencies such as the World Bank.
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Per Lennart Krusell, born 1959, is a Swedish macroeconomic theorist who is currently the Torsten and Ragnar Soderberg Chair in Economics and the Institute for International Economic Studies, Stockholm University, as well as Centennial Professor of Economics at the London School of Economics.
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Greenwood–Hercowitz–Huffman preferences are a particular functional form of utility developed by Jeremy Greenwood, Zvi Hercowitz, and Gregory Huffman, in their 1988 paper Investment, Capacity Utilization, and the Real Business Cycle. It describes the macroeconomic impact of technological changes that affect the productivity of new capital goods. The paper also introduced the notions of investment-specific technological progress and capacity utilization into modern macroeconomics.
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Reuben Gronau is an Israeli economist, notable for his contributions to labour economics and economic sociology, in particular the Gronau model of time allocation and home production.
Jess Benhabib is a professor at New York University, and known for his contributions to growth theory and sunspot equilibria.
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