Multi-criteria Production Theory: Foundation of Performance Evaluation
Multi-criteria production theory (MCPT) is a decision-theoretical generalisation of traditional production theories developed in order to integrate concerns of modern management science and economics, such as sustainability and environmental protection. Its main idea is to distinguish between the technologically determined inputs and outputs of a production system’s activity and their desired or undesired impacts on artificial or natural environments. This is formalised by multiple value functions mapping the production possibility set (PPS) onto the value possibility set (VPS). Depending on the concretisation of the relevant objectives different kinds of economic, ecological or social concerns can be captured and analysed in view of the performance of the possible production activities as the decision alternatives at hand. Chapter 2 proves main theorems of MCPT and discusses the fundamentality of some axioms used in traditional production theories. The theorems are concerned with sufficient conditions for certain properties of the VPS, in particular its convexity or linearity. Furthermore, a monotonicity result for a hierarchy of valuations is derived. While an axiom of value disposability is plausible and helps to guarantee the convexity of the VPS, other axioms do not seem to be realistic or better must refer to the costs and benefits instead of the inputs and outputs.
KeywordsDisposability Efficiency Production possibility set Production theory Value function
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