Market Perfection and the Case of Property: Methodological shortcomings of Economic Positivism

The intersection between valuation practice and market theory is examined. Implications of the perfect market assumption are explored and applied to the pricing of land. Some emerging currents in economics and property are related to the problem of the market as a pricing mechanism for land. It is found that the formal assumption of market perfection, despite from being broadly recognised as extremely rare in practice, creates complex problems for the pricing of land. Whilst neoclassical economics is largely grounded on the assumption of perfect markets, developments such as institutional economics and the theory of monopolistic competition attempt to bridge the gap between economic theory and positive reality. The paper concludes that these approaches are positively superior but tend to ignore fundamental considerations that led to the original adoption of perfect markets as the basis for economic theory. Implications for valuation theory are examined as well as methodological implications for the direction of property research and the meaningful development of the body of knowledge of the discipline