Joel Dean (economist)
Encyclopedia
- For the poet see Joel DeaneJoel DeaneJoel Deane is an Australian poet, novelist, and speechwriter.-Biography:Deane, born in Melbourne, Australia, lived in the San Francisco Bay Area in the 1990s, working as a technology journalist...
.
Joel Dean (1906–1979) is best known for his contributions to Corporate Finance
Corporate finance
Corporate finance is the area of finance dealing with monetary decisions that business enterprises make and the tools and analysis used to make these decisions. The primary goal of corporate finance is to maximize shareholder value while managing the firm's financial risks...
theory in general, and particularly to the area of Capital budgeting
Capital budgeting
Capital budgeting is the planning process used to determine whether an organization's long term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth pursuing...
. He is regarded as one of the founders of business economics
Business economics
Business economics as a field in applied economics uses economic theory and quantitative methods to analyze business enterprises and the factors contributing to the diversity of organizational structures and the relationships of firms with labour, capital and product markets...
. His work on pricing
Pricing
Pricing is the process of determining what a company will receive in exchange for its products. Pricing factors are manufacturing cost, market place, competition, market condition, and quality of product. Pricing is also a key variable in microeconomic price allocation theory. Pricing is a...
remains influential in marketing
Marketing
Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
, although his related work on cost curves has been largely ignored by economists.
Biography
Dean was born in Vershire, VermontVershire, Vermont
Vershire is a town in Orange County, Vermont, United States, created under Vermont Charter of August 3, 1781. The population was 629 at the 2000 census.-Geography:...
and educated at Pomona College
Pomona College
Pomona College is a private, residential, liberal arts college in Claremont, California. Founded in 1887 in Pomona, California by a group of Congregationalists, the college moved to Claremont in 1889 to the site of a hotel, retaining its name. The school enrolls 1,548 students.The founding member...
(A.B.
Bachelor of Arts
A Bachelor of Arts , from the Latin artium baccalaureus, is a bachelor's degree awarded for an undergraduate course or program in either the liberal arts, the sciences, or both...
1927), Harvard Business School
Harvard Business School
Harvard Business School is the graduate business school of Harvard University in Boston, Massachusetts, United States and is widely recognized as one of the top business schools in the world. The school offers the world's largest full-time MBA program, doctoral programs, and many executive...
(MBA, 1928) and at the University of Chicago
University of Chicago
The University of Chicago is a private research university in Chicago, Illinois, USA. It was founded by the American Baptist Education Society with a donation from oil magnate and philanthropist John D. Rockefeller and incorporated in 1890...
(Ph.D, 1936). His doctoral dissertation discussed "A Statistical Examination of the Behavior of Average and Marginal Cost". He was one of the founders of business economics
Business economics
Business economics as a field in applied economics uses economic theory and quantitative methods to analyze business enterprises and the factors contributing to the diversity of organizational structures and the relationships of firms with labour, capital and product markets...
with his Managerial Economics (1951) and Capital Budgeting (1951)
His research covered costs
Economic cost
The economic cost of a decision depends on both the cost of the alternative chosen and the benefit that the best alternative would have provided if chosen. Economic cost differs from accounting cost because it includes opportunity cost....
, pricing
Pricing
Pricing is the process of determining what a company will receive in exchange for its products. Pricing factors are manufacturing cost, market place, competition, market condition, and quality of product. Pricing is also a key variable in microeconomic price allocation theory. Pricing is a...
, demand analysis, profits and profit management, and also competition and government regulations. It was with the publication of his "Capital Budgeting" in 1951 that NPV
Net present value
In finance, the net present value or net present worth of a time series of cash flows, both incoming and outgoing, is defined as the sum of the present values of the individual cash flows of the same entity...
became widely used in corporate finance. Discounted Cash Flow
Discounted cash flow
In finance, discounted cash flow analysis is a method of valuing a project, company, or asset using the concepts of the time value of money...
approach and Internal Rate of Return
Internal rate of return
The internal rate of return is a rate of return used in capital budgeting to measure and compare the profitability of investments. It is also called the discounted cash flow rate of return or the rate of return . In the context of savings and loans the IRR is also called the effective interest rate...
rule became popular by the ardent promotion of Joel Dean Associates.
He taught at Indiana University
Indiana University
Indiana University is a multi-campus public university system in the state of Indiana, United States. Indiana University has a combined student body of more than 100,000 students, including approximately 42,000 students enrolled at the Indiana University Bloomington campus and approximately 37,000...
, the University of Chicago, and Columbia University
Columbia University
Columbia University in the City of New York is a private, Ivy League university in Manhattan, New York City. Columbia is the oldest institution of higher learning in the state of New York, the fifth oldest in the United States, and one of the country's nine Colonial Colleges founded before the...
. During world war II he was with the Office of Price Administration
Office of Price Administration
The Office of Price Administration was established within the Office for Emergency Management of the United States government by Executive Order 8875 on August 28, 1941. The functions of the OPA was originally to control money and rents after the outbreak of World War II.President Franklin D...
, and was also a research associate of the Cowles Commission. In 1940 he founded Joel Dean Associates, a management consulting
Management consulting
Management consulting indicates both the industry and practice of helping organizations improve their performance primarily through the analysis of existing organizational problems and development of plans for improvement....
firm. He was on the editorial boards of the Journal of Industrial Economics and the Journal of Marketing for many years.
Cost functions
Dean discovered that cost functionsCost curve
In economics, a cost curve is a graph of the costs of production as a function of total quantity produced. In a free market economy, productively efficient firms use these curves to find the optimal point of production , and profit maximizing firms can use them to decide output quantities to...
of firms are often straight line as opposed to S-shaped functions a fact which disagreed with the classical assumption in microeconomics
Microeconomics
Microeconomics is a branch of economics that studies the behavior of how the individual modern household and firms make decisions to allocate limited resources. Typically, it applies to markets where goods or services are being bought and sold...
(which had not been based on observation
Empirical
The word empirical denotes information gained by means of observation or experimentation. Empirical data are data produced by an experiment or observation....
).
It is thought that Dean's observation was ignored by the mainstream economists, for it required a revolutionary change of the theory of microeconomics: if the cost function of a firm is linear, then the total variable cost is proportional to the production volume and the marginal cost
Marginal cost
In economics and finance, marginal cost is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good...
is constant, in which case the usual formula "price = marginal cost" fails, and the common explanation as to why the supply curve is an increasing function of the market price
Market price
In economics, market price is the economic price for which a good or service is offered in the marketplace. It is of interest mainly in the study of microeconomics...
also fails.
Selected works
Joel Dean's best known work is Capital Budgeting (New York: Columbia University Press, 1951. ISBN 0231018479). His Statistical Cost Estimation (Indiana University Press, 1976), by contrast, is a forgotten book, perhaps for the reasons outlined above.Other publications include:
- "Does Advertising Belong in the Capital Budget?" Journal of Marketing, Vol. 30, No. 4., October 1966.
- "Pricing Policies for New Products". Harvard Business ReviewHarvard Business ReviewHarvard Business Review is a general management magazine published since 1922 by Harvard Business School Publishing, owned by the Harvard Business School. A monthly research-based magazine written for business practitioners, it claims a high ranking business readership among academics, executives,...
, Nov 1976. - "An Approach to Internal Profit Measurement." National Accounting Association Bulletin, March 1958.
- "Better Management of Capital Expenditures through Research." Journal of Finance, May 1953.
- "Break-Even Analysis and the Measure of Capital Productivity." Advanced Management, April 1955.
- "Cost Structures of Enterprises and Break-Even Charts", The American Economic Review, 38(2) pp. 153–164, 1948 .
External links
- Foundations of Business Economics: The Contributions of Joel Dean Karen Fortin and Walter J. Primeaux, University Press of FloridaUniversity Press of FloridaThe University Press of Florida is the scholarly publishing arm of the State University System of Florida representing all eleven universities, and is charged by the Florida Board of Governors with publishing books of intellectual distinction and significance, books that contribute to improving the...
, 1984. - The Search For Intrinsic Value: Some Selected Moments in the History of DPV, Professor Eric Kirzner, Rotman School of ManagementRotman School of ManagementThe Joseph L. Rotman School of Management commonly known as Rotman School of Management is the University of Toronto's business school, located in St. George Street in Downtown Toronto. The school, named after Joseph L...