Production theory is an important part of the value theory of neoclassical economics. This paper examines the theory from a critical point of view, and points out its three inherent defects: it is not suitable for monopoly market conditions, eliminates uncertain factors, and studies production only from the perspective of exchange.

Keywords: neoclassical economics, production theory, market

When commenting on the production theory of neoclassical economics, domestic academic circles think that the conclusion of the optimal combination of production factors put forward by this theory can be used by me, but it involves general production and excludes specific production relations; The production function has the difficulty of "capital measurement", which seriously affects the correctness of production theory (Gao Hongye, 1997). It should be said that the above comments are authoritative in China and have certain theoretical basis. Through intensive reading of the original works, from the height of current theoretical thinking, the author thinks that the production theory of neoclassical economics is flawed.

First, it only applies to perfectly competitive enterprises.

The neoclassical production equilibrium theory assumes that the prices of production factors of an enterprise are fixed in the market, and the enterprise is the receiver of the market price, not the decider of the market price, or it cannot have any influence on the market price. In fact, the market price is directly related to the scale and number of enterprises in the industry: when the scale of enterprises in the industry is large and the number is small, the decision-making power of market price is in the hands of these enterprises; When the enterprises in the industry are small in scale and large in quantity, the market price is not determined by each enterprise, and the price at this time is really determined by the market.

Monopoly enterprises are the normal state of market economy. From the reality of economic operation, enterprises pursue the greatest interests. It is the dream of every enterprise to take legal measures to defeat all competitors and become the only market supplier, or at least there are only a few left in the industry, resulting in so-called monopoly competition. Only in this case can manufacturers have the right to determine market prices and formulate market technical standards, and have greater new product development capabilities; At the same time, monopoly enterprises prevent new competitors from entering by setting higher enterprise thresholds. From the perspective of the history of enterprise development, the important signs that determine the level of economic development in a period are those enterprises with monopoly status; An enterprise either grows into a monopoly enterprise or becomes the merger object of other monopoly enterprises. It can be said that under the condition of market economy, monopoly enterprises are a common economic phenomenon.

However, this universal enterprise organization cannot be explained by neoclassical production theory. This is because monopoly enterprises can partially or completely determine the price; The quantity of its products is uncertain, and it depends on market price, market demand, competitors and so on to decide how much to produce. Its marginal cost does not necessarily increase. On the one hand, when its output does not reach the equilibrium point, on the other hand, it will benefit from the continuous development of new technologies, which will prevent the marginal cost from rising. This shows that in the market economy, the most explanatory production theory should be the production theory of monopoly manufacturers, and which theory can better explain monopoly manufacturers is more scientific. As a theory, neoclassical production theory certainly has its theoretical value, but its theoretical vitality is self-evident because it fails to provide convincing reasons to explain how monopoly manufacturers rise, how they operate internally, and how different manufacturers compete and cooperate.

Second, eliminate the existence of uncertain factors.

The certainty of neoclassical production theory mainly lies in: every manufacturer is very clear about the combination of production inputs, the variety and price of each combination are optimal, the time is the most appropriate, and no adjustment is needed; Under the given technical conditions, the technology and production combination owned by the manufacturer is the most reasonable configuration. In the neoclassical model, once you have this reasonable configuration, you can continue production once and for all, that is, any new technology can find the optimal production combination. As for where the new technology comes from and how to achieve the optimal combination, neoclassical economists seem to think it is unnecessary to consider it. The production equilibrium of any enterprise in the market is certain. As long as the marginal productivity of the last dollar is equal in each use, any enterprise can reach a production equilibrium, and it is optimal and stable at this equilibrium point. As for the internal structure and operation mechanism of manufacturers, how to adjust the production mix and information system in the face of the market, etc., neoclassical production theory has not been discussed. Although the theory is concise and beautiful, it is easy to demonstrate mathematically, but the price it pays is that it is still dealing with a system like the predecessors, in which the number of production factors used is fixed and other related facts are more or less known.

Manufacturers in the market competition are faced with extremely complex and diverse environments, and these complex factors can be summarized by uncertainty. Uncertainty is widespread, because the market is composed of many producers, consumers and commodities, and it is a difficult problem to understand the market with certainty. Uncertainty is an objective fact, and the existence of uncertain factors cannot be ignored because of the pursuit of theoretical simplicity and logical perfection; Calculus and probability theory all assume that they have complete knowledge, accurate judgment and correct actions about all the facts of the present and future when dealing with economic problems, which is not in line with the essential characteristics of uncertainty. Therefore, calculus and probability theory are not effective tools to deal with uncertain economic problems, and it is impossible to explore the mystery of uncertainty with mathematical tools such as calculus and probability theory in the existing neoclassical production theory. What dominates economic behavior is either the prediction of the results that this behavior will produce or the view of what is appropriate behavior based on conventional judgment; Either it is based on past experience and lessons, which may prove unreliable. Ignoring production itself, the author says that neoclassical production theory studies production from the perspective of exchange, but production itself has been ignored for the following reasons:

According to the mode of consumption theory, the production theory is established. According to the consumption theory of neoclassical economics, consumers come to the market with money, and after careful selection, they buy products that they are satisfied with. The equilibrium condition is equal to the marginal utility brought by the last 1 yuan. After some argumentation, neoclassical economists come to the conclusion that production theory and consumption theory are similar: under certain technical conditions, when producers buy certain factors of production, and after many times of substitution of factors of production, the marginal productivity obtained by purchasing any factors of production is equal when the equilibrium conditions of the optimal production combination are reached at the equilibrium point. According to neoclassical economists, the theory of production and consumption is to optimize the combination of products (elements) in market exchange, and the content of equilibrium conditions is exactly the same.

A basic mistake made by neoclassical economists here is to confuse production and consumption. No matter how similar it is, it still belongs to different categories. If different theoretical categories are subject to the same theoretical explanation, then the theory will either become dogma or religion, and the consequences will be the same, that is, the independent academic research itself will be cancelled.

Three, the income of production factors is the result of their respective factor market transactions.

From the perspective of marginal productivity, workers get wages, capitalists get interest, landlords get land rent, and entrepreneurs have no profit. Previously, when commenting on this theory, domestic scholars thought that neoclassical economists defended entrepreneurs, so the theory was vulgar. In my opinion, this is a mixture of scientific discussion and political judgment. In fact, neoclassical economists, including Walras, came to this conclusion precisely because their theoretical logic is inevitable, because they look at production from the perspective of market transactions and the income of production factors from the perspective of transactions. Since production is just an empty shell, and every factor of production has obtained the best trading effect in the market exchange, the profit left to entrepreneurs is of course zero. This conclusion seems to be inconsistent with economic facts, and seems to be contrary to Marx's theory of surplus value. But in fact, Marx also thinks that the capitalist relations of production are fair when the market (including the labor market) is exchanged, and Walras only studies production from the perspective of exchange.

There is only one scientific conclusion. At this point, Marx and Walras reached the same conclusion, but Walras did not go further into the enterprise. Perhaps in his view, internal analysis is not important. It is important to study how the market equilibrium prices of various production factors are determined. Different economists often make their own theoretical choices because of different theoretical systems, which is the normal law of academic development. If one economist's conclusion is simply used to judge another economist's point of view, this is not the proper attitude of scientific research and is not conducive to scientific development.

Fourth, the market price is the only criterion to determine the optimal output of manufacturers.

The equilibrium condition of neoclassical economics production theory is that the price of production factors = marginal product value and product price = marginal cost. In other words, because the prices of production factors and products are fixed in a completely competitive market, under a given technical condition, the manufacturer has only one optimal production combination, under which the output is the best and the production cost is the lowest. From this point of view, under the given production technology conditions, the only factor that determines the optimal output and the lowest cost of the manufacturer is the price determined in the market transaction.

According to this theoretical logic, the decision-makers of manufacturers only need to face the market, and their own factors will become dispensable; Moreover, the market price is certain, and the optimal value can be obtained through the production function, so the manufacturer becomes a rational machine, which is either omnipotent because any production combination can be included in the production function to obtain the optimal value; Either he is a rational fool, except for simple and repeated rational calculation, which actually fails to provide a more telling theoretical explanation.

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