Re: [Pen-l] idiot's guide to sraffa?

[Jim Devine <jdevine03@xxxxxxxxx>]

Maxim Linchits wrote:
> I haven't entirely grasped the some of the points [Steve Keen] made in critiques of the supply and demand functions. For example his argument (demand chapter) against the smooth demand curve, as I read it, is that a change in prices affects income distribution which produces a new aggregate indiff. curve which in turn affects demand. So the resulting demand function may not be one-to-one. But this critique would apply only to those commodities/ classes of comm. which take up a significant share of incomes, right?  I'm curious  what you made of his critique, if you can recall it... Does it completetely demolish the "law of demand" or merely describe some exceptions to this "law"?<

I don't have SK's story in my memory bank, so I can't really reply to
it. What you say does sound familiar, though. It makes sense, as does
your critique.

The thing about the neoclassical "law" of demand, like so many other
aspects of their theory, is that it works for small changes of
magnitudes with small impacts. Or if there are no income effects. (An
old prof of mine in grad school told us that the Chicago school didn't
like income effects and that they were trying to get rid of them.
Thus, the whole economy would involve the story of price changes
evoking results with no messy complications.)

However, absent other information, I'd use the "law of demand." When
something becomes more expensive, less will be purchased (all else
constant). As a fan of Marxian political economy, I see no problem
with the "law of demand" (even if it were absolutely true, a
physics-type law) except that it represents a miniature worms-eye view
that helps prevent one from seeing the totality of capitalist
exploitation.

In other words, my response to SK (as you summarize his critique) is "so what?"

In general, his book is a useful Samizdat for economics graduate students.
-- 
Jim Devine / "Disbelief in magic can force a poor soul into believing
in government and business."  -- Tom Robbins
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