Graham Ive and the methodology of construction economics

Abstract

Graham Ive’s central contribution to our methodological debate was his insistence on the firm as the analytical unit. Ive argues we should reject theories if the aspect of construction we are examining does not satisfy the assumptions of a particular theoretical model. We see this in his rejection of neoclassical economic theories in the two topics discussed in this paper: the adoption of innovations in construction; and microeconomic analysis as it relates to price determination in the market for construction. The former requires studying not just participants in the building process, but also participants in the innovation process, and the latter uses post-Keynesian pricing theory where prices are set according to mark-up procedures and vary with costs, but not directly with demand. This is in contrast to the general equilibrium, perfectly competitive price setting of neoclassical economics. Ive and his collaborators show a way towards better research in their emphasis on theory and the insistence that for construction economics the analytical units are the industry and the firm, not the project. Ive’s concern is that the processes involved in organizing the production of buildings should be seen as a distinctive and defining element of our analysis of the industry.

Keywords:

• Economic theory
• firms
• innovation
• methodology
• price determination.

Notes

1. Any introductory text in economics will cover price determination and innovation.

2. See the Institute for New Economic Thinking site at http://ineteconomics.org/about and http://core-econ.org/ for details.

3. This is illustrated by the use of patents which serve to create a monopoly for the innovator to allow him/her to recoup the costs of developing the innovation.