Abstract
In this chapter we critique the neoclassical economics basis of standard real estate valuation theory. The overall intention is to ‘falsify’ its ‘hard-core’, so as to establish the raison d’etre for the alternative. It is of course the case that any critical view presupposes, requires, or is facilitated by a particular perspective as the reference frame. The critique presented in this chapter is from the vantage point provided by two interrelated theoretical frameworks, namely critical realism and new institutional economics (NIE). These two form part of the wider heterodox tradition in economics, a constellation of theoretical perspectives that are united in their opposition to the mainstream. The specific objectives for this chapter are twofold. Firstly, it is to explain that conventional theory is inadequate, or inappropriate, for the analysis of actual real estate markets. This inadequacy accounts for the problems in valuation theory and practice alluded to in the first chapter. Arising from this, we make the rather profound argument that market value, as a determinate and knowable magnitude, does not exist in reality. The second objective is to prepare the ground for an alternative theoretical framework, one that provides a more competent explanation for these problems.
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Mooya, M.M. (2016). Real Estate Markets and Neoclassical Economic Theory: A Heterodox Critique. In: Real Estate Valuation Theory. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-49164-5_5
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DOI: https://doi.org/10.1007/978-3-662-49164-5_5
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