ABSTRACT
This chapter suggests that a fruitful area in which to put one's energies,' in order to deepen our understanding of the behaviour of economies, is in an area that might be called 'micro-micro' theory. Of course, this suggests that conventional micro theory is not micro enough. Neoclassical theory is formulated 'as if' all economic behaviour is market behaviour and all economic decisions are directly or indirectly market decisions. Non-optimal behaviour on the individual level leads to the non-optimal behaviour of the traditional economic units, the firm and the household. These notions may help us to analyse differences in the X-efficiency of firms, industries, and economies. The most interesting cases, and probably most important from the viewpoint of the economy, are those in which agents make exchanges with other agents on behalf of their principals. One means of seeing the importance of non-market economic behaviour is through what might be called the 'principal-agent' problem.
