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Yet costs, prices, industries and markets are the very lifeblood of microeconomics, just as inflation, output and growth are the lifeblood of macroeconomics. Economics dominates public policy and every countrys chief executive regards his (or her) macroeconomic adviser as a vital aide. But economics has almost no influence on business policy, and in only a small minority of companies does the chief executive have an economic adviser at all. The evolution of microeconomics over the past century provides a partial answer. 1990 is not only the centenary of the Economic Journal; it is also the centenary of the first edition of Alfred Marshalls Principles of Economics. It was Marshall who set the agenda for much of the economics that was to occupy the Journal for the subsequent 100 years. Marshalls analysis, and his understanding of the commerce of his day, was sophisticated and wide-ranging.
Indeed Marshall probably knew more about the day-to-day functioning of business than any leading economist this century. Yet his approach barely scratched the surface of the firm. The Structure-Conduct-Performance Paradigm. Since the Second World War, the dominant tradition in industrial organization has been based on the strongly empirical structure-conduct-performance paradigm. The focus of this work is clearly set out by Bain (1959: pp. vii-viii) I am concerned with the environmental setting within which enterprises operate and in how they behave in these settings as producers, sellers and buyers.
By contrast, I do not take an internal approach, more appropriate to the field of management science, such as could inquire how enterprises do and should behave in ordering their internal operations and would attempt to instruct them accordingly... my primary unit for analysis is the industry or competing groups of firms, rather than the individual firm or the economy wide aggregate of enterprises.
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Research essay sample on The Structure Conduct Performance Paradigm
