Joel Dean (1906–1979) was an American economist best known for his contributions to corporate finance theory in general, and particularly to the area of

capital budgeting Capital budgeting in corporate finance is the planning process used to determine whether an organization's long term capital investments such as new machinery, replacement of machinery, new plants, new products, and research development projects ...

.Foundations of Business Economics: The Contributions of Joel Dean
Walter J. Primeaux, Karen Fortin; University Presses of Florida, 1984 He is regarded as one of the founders of

business economics Business economics is a field in applied economics which uses economic theory and quantitative methods to analyze business enterprises and the factors contributing to the diversity of organizational structures and the relationships of firms with ...

. His work on

pricing Pricing is the process whereby a business sets the price at which it will sell its products and services, and may be part of the business's marketing plan. In setting prices, the business will take into account the price at which it could acqui ...

remains influential in

marketing Marketing is the process of exploring, creating, and delivering value to meet the needs of a target market in terms of goods and services; potentially including selection of a target audience; selection of certain attributes or themes to empha ...

Biography

Dean was born in

Vershire, Vermont Vershire is a town in Orange County, Vermont, United States, created under Vermont Charter of August 3, 1781. The population was 672 at the 2020 census. The name Vershire is a portmanteau of Vermont and New Hampshire. History The town and a v ...

and educated at

Pomona College Pomona College ( ) is a private liberal arts college in Claremont, California. It was established in 1887 by a group of Congregationalists who wanted to recreate a "college of the New England type" in Southern California. In 1925, it became t ...

(

A.B. Bachelor of arts (BA or AB; from the Latin ', ', or ') is a bachelor's degree awarded for an undergraduate program in the arts, or, in some cases, other disciplines. A Bachelor of Arts degree course is generally completed in three or four years ...

1927),

Harvard Business School Harvard Business School (HBS) is the graduate business school of Harvard University, a private research university in Boston, Massachusetts. It is consistently ranked among the top business schools in the world and offers a large full-time MBA p ...

(

MBA A Master of Business Administration (MBA; also Master's in Business Administration) is a postgraduate degree focused on business administration. The core courses in an MBA program cover various areas of business administration such as accounti ...

, 1928) and at the

University of Chicago The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park neighborhood. The University of Chicago is consistently ranked among the be ...

(

Ph.D A Doctor of Philosophy (PhD, Ph.D., or DPhil; Latin: or ') is the most common degree at the highest academic level awarded following a course of study. PhDs are awarded for programs across the whole breadth of academic fields. Because it is ...

, 1936). His

doctoral dissertation A thesis ( : theses), or dissertation (abbreviated diss.), is a document submitted in support of candidature for an academic degree or professional qualification presenting the author's research and findings.International Standard ISO 7144: ...

discussed "A Statistical Examination of the Behavior of Average and Marginal Cost". He was one of the founders of

with his ''Managerial Economics'' (1951) and ''Capital Budgeting'' (1951) His research covered

costs In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something or deliver a service, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which ...

, demand analysis, profits and profit management, and also competition and government regulations. It was with the publication of his "Capital Budgeting" in 1951 that NPV became widely used in corporate finance.

Discounted Cash Flow The discounted cash flow (DCF) analysis is a method in finance of valuing a security, project, company, or asset using the concepts of the time value of money. Discounted cash flow analysis is widely used in investment finance, real estate devel ...

approach and

Internal Rate of Return Internal rate of return (IRR) is a method of calculating an investment’s rate of return. The term ''internal'' refers to the fact that the calculation excludes external factors, such as the risk-free rate, inflation, the cost of capital, or fi ...

rule became popular by the ardent promotion of Joel Dean Associates. He taught at

Indiana University Indiana University (IU) is a system of public universities in the U.S. state of Indiana. Campuses Indiana University has two core campuses, five regional campuses, and two regional centers under the administration of IUPUI. *Indiana Universit ...

, the University of Chicago, and Columbia University. During World War II he was with the

Office of Price Administration The Office of Price Administration (OPA) was established within the Office for Emergency Management of the United States government by Executive Order 8875 on August 28, 1941. The functions of the OPA were originally to control money (price contr ...

, and was also a research associate of the

Cowles Commission The Cowles Foundation for Research in Economics is an economic research institute at Yale University. It was created as the Cowles Commission for Research in Economics at Colorado Springs in 1932 by businessman and economist Alfred Cowles. In 1939 ...

. In 1940 he founded Joel Dean Associates, a

management consulting Management consulting is the practice of providing consulting services to organizations to improve their performance or in any way to assist in achieving organizational objectives. Organizations may draw upon the services of management consultant ...

firm. He was on the editorial boards of the '' Journal of Industrial Economics'' and the ''

Journal of Marketing The ''Journal of Marketing'' is a bimonthly scholarly journal that publishes peer-reviewed research in marketing. It is published by the American Marketing Association. Established in 1936, It is the fourth-oldest major journal covering marketing ...

'' for many years.

Cost functions

Dean discovered that cost functions of firms are often straight line as opposed to S-shaped functions a fact which disagreed with the classical assumption in

microeconomics Microeconomics is a branch of mainstream economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Microeconomics focu ...

(which had not been based on observation). It is thought 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 In economics, supply is the amount of a resource that firms, producers, labourers, providers of financial assets, or other economic agents are willing and able to provide to the marketplace or to an individual. Supply can be in produced goods, l ...

is an

increasing function In mathematics, a monotonic function (or monotone function) is a function between ordered sets that preserves or reverses the given order. This concept first arose in calculus, and was later generalized to the more abstract setting of order ...

of the

market price A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the c ...

also fails. Frederic S. Lee 1984 The Margianlist Controversy and the Demise of Full Cost Pricing, ''Journal of Economic Issues'' 18(4): 1107-1132.

Selected works

Joel Dean's best known work is ''Capital Budgeting'' (New York: Columbia University Press, 1951. ). 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 ''Harvard Business Review'' (''HBR'') is a general management magazine published by Harvard Business Publishing, a wholly owned subsidiary of Harvard University. ''HBR'' is published six times a year and is headquartered in Brighton, Massach ...

, 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.

References

External links

Foundations of Business Economics: The Contributions of Joel Dean
Karen Fortin and Walter J. Primeaux,

University Press of Florida The University Press of Florida (UPF) is the scholarly publishing arm of the State University System of Florida, representing Florida's twelve state universities. It is located in Gainesville near the University of Florida, one of the state's majo ...

, 1984.
The Search For Intrinsic Value: Some Selected Moments in the History of DPV
Professor Eric Kirzner,

Rotman School of Management The Joseph L. Rotman School of Management (commonly known as the Rotman School of Management, the Rotman School or just Rotman) is the University of Toronto's graduate business school, located in Downtown Toronto. The University of Toronto has b ...

{{DEFAULTSORT:Dean, Joel Corporate finance theorists American economics writers American finance and investment writers American textbook writers University of Chicago alumni 1979 deaths 1906 births Harvard Business School alumni Pomona College alumni 20th-century American economists People from Vershire, Vermont 20th-century American male writers American male non-fiction writers