Joel Dean (economist)

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Joel Dean (1906–1979) was an economist best known for his contributions to corporate finance theory in general, and particularly to the area of capital budgeting.[1] He is regarded as one of the founders of business economics. His work on pricing remains influential in marketing.[2]


Dean was born in Vershire, Vermont and educated at Pomona College (A.B. 1927), Harvard Business School (MBA, 1928) and at the University of Chicago (Ph.D, 1936). His doctoral dissertation discussed "A Statistical Examination of the Behavior of Average and Marginal Cost".[1] He was one of the founders of business economics with his Managerial Economics (1951)[3] and Capital Budgeting (1951)[4]

His research covered costs, pricing, demand analysis, profits and profit management, and also competition and government regulations.[1] It was with the publication of his "Capital Budgeting" in 1951 [5] that NPV became widely used in corporate finance.[6] Discounted Cash Flow approach and Internal Rate of Return rule became popular by the ardent promotion of Joel Dean Associates.[7][8]

He taught at Indiana University, the University of Chicago, and Columbia University. During World War II he was with the Office of Price Administration, and was also a research associate of the Cowles Commission. In 1940 he founded Joel Dean Associates, a management consulting firm. He was on the editorial boards of the Journal of Industrial Economics and the Journal of Marketing for many years.

Cost functions[edit]

Dean discovered[9][10] that cost functions of firms are often straight line as opposed to S-shaped functions[11] a fact which disagreed with the classical assumption in microeconomics (which had not been based on observation).[12]

It is thought[by whom?] 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 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 also fails. [13][14][15]

Selected works[edit]

Joel Dean's best known work is Capital Budgeting (New York: Columbia University Press, 1951. ISBN 0-231-01847-9). 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 Review, 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.


  1. ^ a b c Foundations of Business Economics: The Contributions of Joel Dean Walter J. Primeaux, Karen Fortin; University Presses of Florida, 1984
  2. ^ Collection of groundbreaking writings in the field of advertising Archived 2007-10-11 at the Wayback Machine, Dr. A. Murdoch, SGH;
  3. ^ Joel Dean. Managerial Economics. Pp. xiv, 621. New York: Prentice-Hall, Inc., 1951.
  4. ^ Joel Dean. Capital Budgeting: Top Management Policy on Plant, Equipment, and Product Development. 174pp. Columbia University Press, (June) 1951.
  5. ^ Capital Budgeting (New York: Columbia University Press, 1951.
  6. ^ Great Moments in Financial Economics: Present value Archived 2007-07-13 at the Wayback Machine, Prof. Mark Rubinstein.
  7. ^ R.H. Parker. Discounted Cash Flow in Historical Perspective. Journal of Accounting Research 6(1): 58-71. 1968.
  8. ^ Johnson, H.T. and Kaplan R.S. Relevance Lost: The Rize and Fall of Management Accounting, Harvard Business School Press, 1988. Chapter 7.
  9. ^ Joel Dean 1936 "Statistical determination of cost, with special reference to marginal cost" The University of Chicago Press, Chicago-Ill.
  10. ^ Joel Dean 1941 The Relation of Cost to Output for a Leather Belt Shop Published by NBER.
  11. ^ Joel Dean 1976 "Statistical Cost Estimation", Indiana University Press.
  12. ^ Richard A. Miller 2001 "Firms' Cost Functions: A Reconstruction," Review of Industrial Organization 18(2) 183-200.
  13. ^ Hans Apel 1948 Margianl Cost Constancy and its Implications. The American Economic Review 38(5): 870-885.
  14. ^ R. B. Heflebower 1955 Full cost, Cost Changes, and Prices. in NBER (Ed.) Business Concentrateion and Price Policy, Priceton University Press.
  15. ^ Frederic S. Lee 1984 The Margianlist Controversy and the Demise of Full Cost Pricing, Journal of Economic Issues 18(4): 1107-1132.

External links[edit]