Rejoinder to Skott

[Paul Davidson <PB108928%UTKVM1.BITNET@xxxxxxxxxxxxxxxxx>]

Dear Peter: You may accuse me of sloppy typing and therefore having
many typos in my e-mil postings, but please do not accuse me
of"very sloppy language" (see your 9Mar e-mail). I try to choose my
words carefully so as to provide as precise an exposition as I am
capable of.  Accordingly if you will check my 8March posting you
will see that I specifically wrote: "The imperfect competition
firm's supply curve requires the same specification of marginal
costs PLUS alternative (expected) market demand curves." (Note I
said alternative expected  [I prefer the word expected to your word
conjectured] demand CURVES!) In this definition I did not specify
a single elasticity of demand. I did, however, go on to illustrate
using your earlier posting exposition that if we assume (as you
explicitly did in an earlier posting) a horizontal marginal cost
curve and a constant mark-up for profit maximizing imperfectly
competitive firms, then this is a supply curve for the firm -given
(expected) alternative market demand curves that are assumed to be
isoelastic. Thus you specified a  unique supply curve for  an
imperfectly competitive firm by this assumption of mc costs plus
implicitly assumed market isoelasticity demand conditions. (Of
course, whether the alternative demand curves are isolelastic or
not.
     As long as you accept profit maximization (and all your
postings indicate you do) even for imperfectly competitive firms,
then  "supply decision" of such firms indicates that firms  have
expected alternative demand curves in their heads which they will
respond to. Accordingly, there is a supply curve representing the
minimum market price (made up of the marginal costs plus the
expected monopoly rent) that firms will require in order for them
to undertake the effort necessary for different output and hiring
decisions. In your simplest case of a profit maximizing constant
wage cost mark-up firm (where it is assumed that expected
alternative demand curves are isolelastic), then the supply curve
is simple-- it is merely the marginal cost curve multiplied  by a
constant greater than unity. In the purely competitive case, this
multiplier of the marginal cost curve is unity and so the marginal
cost curve IS the supply curve. {Keynes, by assuming a given
"degree of competition" (p. 245 of the GT) assumed, for profit
maximizing firms, that shifting alternative demand curves were
isolelastic. In other words, Keynes assumed that the Lerner degree
of monopoly (which is the reciprocal of the price elasticity of
demand at the profit maximizing point on the demand curve) was not
a function of aggregate employment. (Although Keynes assumed that
the degree of competition  was exogenous, he still permitted the
possibility of rising marginal costs. If mc was rising, then the
imperfectly competitive firm's supply curve, assuming no change in
the degree of competition was a multiply of an upward sloping mc
curve.)
      If one drops the simplification of a isolelastic demand
curves , then one is assuming that the degree of competition is a
function of aggregate demand. As long as one specifies how the
price elasticity of demand changes as effective demand alters, one
can still produce micro supply CURVES for imperfectly competitive
firms (all this is in Weintraub's APPROACH TO THE THEORY OF INCOME
DISTRIBUTION). At one point Kalecki assumes that the degree of
competition was directly related to aggregate demand (In recession,
firms had greater incentives to collude on mark-ups.) Harrod, in
his 1935 TRADE CYCLE, book. on the other hand, assumed that the
degree of competition was inversely related to employment since
buyers were less sensitive to prices in prosperity than in
recession. Since there is no empirical evidence supporting wither
Kalecki's or Harrod's degree of competition hypothesis., it seems
reasonable to adopt Keynes's given degree of competition.
     But Peter there is still a supply curve for imperfectly
competitive firms. It just requires the analyst to specify whether
the alternative demand curves facing the firm are price isoelastic
or not. When the analyst specifies pure competition he/she is
specifying alternative isoelastic demand curves. Why should we
not require the analyst to make a similar specification when we
discuss imperfect competition?
     Moreover I did not state that you claimed there is only a
supply point in imperfect competition. what I did write is: "If you
are going to claim...a supply point". Apparently you do not ant to
make such a claim-- but you do suggest there is only a single
"supply decision" for a firm in imperfect competition.
     Finally, your  unwillingness to discuss the implications of
your supply decision in terms of spot and forward markets
represents  an unwillingness to use the well-established
Marshallian market period vs short period  toolkit It is not I who
am using "sloppy language" when a try to focus you on using Spot
and Forward price analysis to explain the question that you raise:
namely what do entrepreneurs do when they find that the realized
demand curve differs from their expected demand curve. Over 100
years ago, Marshall showed how to analyze this situation in his
fish market example comparing market period (i.e., SPOT prices) to
his short-run flow supply price (FORWARD prices), where the latter
is the minimum amount necessary to induce entrepreneurs, etc. Come
on Peter take the plunge! (Finally, since I assume that you Peter
as well as most members of the pkt network believe that money is
an   essential nonneutral essential factor in any real world
entrepreneurial economy, why don't you think in terms of my produce
to market vs. produce to order (i.e, to money contract) firms.   It
should be obvious that most imperfectly competitive firms in the
nonvertically integrated industrial structure produce to
contractual orders -- i.e., make marginal hiring decisions as their
forward contract (order) book alters. A spot and forward price
analysis when the length of the order book changes would help you
Peter answer your own inquiry as to what do firms do when realized
demand conditions differ from expected market demand conditions.

     But I guess I will settle for some agreement -- since I never
changed my position regarding expected demand conditions as part of
the supply price of firms.

     Its just too much to hope that people will ever read
Weintraub-- who had the handle on so many of these questions forty
years ago.