Re: marginalism

["Barkley Rosser" <rosserjb@xxxxxxx>]

Gunnar,
     It is well known that von Neumann's model
is a cost of production/reproduction model
somewhat like that of Marx's and other classical
economists.  It does not depend on marginalism
or scarcity of anything at all, as you note.  However,
obviously, von Neumann recognized that the
theoretical infinity of inputs was ultimately absurd.
Thus, his model was intended for contingent use
within time frames within which inputs did not
exhaust.  I see no reason to declare his model
ridiculous because of that.
      Certainly there are other theories of value
besides those derived from marginalism.  One
can even apply marginalism in the model above,
except that it is a waste of time because in a
linear model the margin equals the average, so
one can simply use the latter and dispense with
the former.
Barkley Rosser
----- Original Message -----
From: "Gunnar Tómasson" <gunnar.tomasson@xxxxxxxxxxx>
To: "Barkley Rosser" <rosserjb@xxxxxxx>; <pkt@xxxxxxxxxxxxxxxx>
Sent: Tuesday, October 28, 2003 1:40 PM
Subject: Re: marginalism


> Barkley:
>
> Re. the following:
>
> >      Just for the record, I have various problems
> > with "marginalism," and am not frequently some
> > great defender of it.  But, the idea that its biggest
> > problem is some alleged "unlimited" supply of
> > resources is the least of its problems in my view.
>
> Comment:
>
> Below is an extract from an old working paper of mine on related issues.
>
> Gunnar
>
>
>
> (i)                 General equilibrium
>
>
>
> The mathematical genius, John von Neumann, is recognized as the foremost
> pioneer in the construction of general equilibrium models in the twentieth
> century.  In a recent book, his model was summarized briefly as follows:
>
>
>
> "In a new [1937] breakthrough John von Neumann first formulated a balanced
> and steady-state growth of a general economic equilibrium and proved the
> existence of a solution.  The breakthrough did not lie in the subject
> matter, which was still allocation and relative price in general
equilibrium
> using maxima and minima.  Indeed, all economists can appreciate the simple
> beauty, yet high degree of generality, characterizing the von Neumann
model.
> There is substitution in both production and consumption.  The model "can
> handle capital goods without fuss and bother," as Dorfman-Samuelson-Solow
> put it.  There is explicit optimization in the model: the solution weeds
out
> all but the most profitable process or processes.  There are free and
> economic goods, indeed the solution tells us which will be free and which
> economic." [106]
>
>
>
> Economists in the modern mainstream macroeconomics tradition have analyzed
> von Neumann's model from the point of view of mathematics, neglecting to
> test it for analytical coherence and consistency along the following
lines:
>
>
>
> 1.                  von Neumann assumed "that the natural factors of
> production, including labour, can be expanded in unlimited quantities."
> [107]
>
> 2.                  He also defined a "free good" to be one whose supply
> exceeds the need for it.
>
> 3.                  Thus, "free goods" within von Neumann's model may be
> "free" one day and "non-free" the next, although he did not make that
point.
>
> 4.                  Since all factors of production "can be expanded in
> unlimited quantities" by assumption, von Neumann's model has built into
its
> premises the conclusion that all goods may in time become "free" goods.
>
> 5.                  Since time is not an essential feature of any general
> equilibrium model, why should only one or some rather than all goods be
held
> to be "free" and not "economic"?
>
> 6.                  Speaking of a mathematical equation relating to the
> subject matter, von Neumann said: "[Its] meaning is: it is impossible to
> consume more of a good G in the total process than is being produced.  If,
> however, less is consumed, i.e., if there is excess production of G, G
> becomes a free good and its price y = 0." [108]
>
> 7.                  von Neumann recognized that there was mathematically
> nothing to preclude all goods from being available in infinite supply so
> that all goods would be "free."
>
> 8.                  von Neumann declared this mathematical possibility to
be
> "meaningless." [109]
>
> 9.                  In principle, a mathematical model can only yield
> conclusions, which are already implied by its premises.
>
> 10.             Therefore, when von Neumann found it "meaningless" that
all
> goods could be "free goods," he effectively declared the premises of his
> model to be "meaningless."
>
>
>
> 106.                  Hans Brems, Pioneering Economic Theory, 1630-1980, A
> Mathematical Restatement, The Johns Hopkins University Press, Baltimore
and
> London, 1986, p. 299.
>
> 107.                  John von Neumann, 'A Model of General Equilibrium',
> 1938, reprinted in Precursors in Mathematical Economics: An Anthology, ed.
> by W. J. Baumol and S. M. Goldfeld, London, 1968, p. 297.
>
>
>
>
>
>
>
> ----- Original Message -----
> From: "Barkley Rosser" <rosserjb@xxxxxxx>
> To: "Clifford Poirot" <cpoirot@xxxxxxxxxxx>; <pkt@xxxxxxxxxxxxxxxx>;
> <william_b_ryan@xxxxxxxxx>
> Sent: Tuesday, October 28, 2003 12:17 PM
> Subject: Re: marginalism
>
>
> >      Just for the record, I have various problems
> > with "marginalism," and am not frequently some
> > great defender of it.  But, the idea that its biggest
> > problem is some alleged "unlimited" supply of
> > resources is the least of its problems in my view.
> > Barkley Rosser
> > ----- Original Message -----
> > From: "Clifford Poirot" <cpoirot@xxxxxxxxxxx>
> > To: <pkt@xxxxxxxxxxxxxxxx>; <william_b_ryan@xxxxxxxxx>
> > Sent: Tuesday, October 28, 2003 11:47 AM
> > Subject: Re: marginalism
> >
> >
> > > In some ways resources are even more constrained in the longer run as
> > > population pressure and increased energy use bumps up against limits.
> > >
> > > -----Original Message-----
> > > From: Barkley Rosser [mailto:rosserjb@xxxxxxx]
> > > Sent: Tuesday, October 28, 2003 11:17 AM
> > > To: william_b_ryan@xxxxxxxxx; pkt@xxxxxxxxxxxxxxxx
> > > Subject: Re: marginalism
> > >
> > >
> > >       "The new approach to economics"???  Is
> > > this something you cooked up or something you
> > > picked up from reading the late Julian Simon?
> > > Very simply, in the short run many resources are
> > > limited.  It takes time to drill new oil wells or increase
> > > output rates from old ones.  It takes time to dig new
> > > coal mines or other mines.  So, marginalism is
> > > certainly relevant in the short run.
> > >      It becomes less so in the long run, although
> > > even there, it is false that resources are "unlimited,"
> > > although many that may be constrained in the short
> > > run are not very constrained in the longer run.  Ironically
> > > those that are really in the shortest supply are not the
> > > non-renewable ones, but the so-called renewable ones.
> > > Once you have driven a species to extinction it is gone
> > > forever.  Unlike methane, we will not find it on Jupiter.
> > > Barkley Rosser
> > > ----- Original Message -----
> > > From: "William B. Ryan" <william_b_ryan@xxxxxxxxx>
> > > To: <pkt@xxxxxxxxxxxxxxxx>
> > > Sent: Saturday, October 25, 2003 10:56 AM
> > > Subject: marginalism
> > >
> > >
> > > > ***>Price is where marginal benefits + utility (aka
> > > > market cost) = cost. (The whole point of marginalism
> > > > and STV) Cost is another term for price.  So...price
> > > > + utility = cost is circular logic.  Circular logic
> > > > is impossible, therefore supply and demand is
> > > > junk.<***
> > > >
> > > > Your argument is invalid not because marginalism is
> > > > not invalid, but because you have falsely described
> > > > marginalism.  Marginalism is invalid because it is
> > > > premised on the false assumptions that resources are
> > > > scarce and demand is unlimited, so the two must
> > > > intersect.  Marginalism is perfectly logical premised
> > > > on those assumptions.
> > > >
> > > > The new approach to economics is premised on the
> > > > facts that resources are permanently abundant and the
> > > > physical capacity to consume is permanently limited.
> > > >
> > > > Resources become abundant through continuing
> > > > discovery, development and innovation.
> > > >
> > > > And it is physically possible to consume only so much
> > > > per unit time.  The limit to consumption is the point
> > > > of satiation.
> > > >
> > > > --
> > > >
> > > > "smithaa02" <sadf@xxxxxxxx> wrote:
> > > > >
> > > > >"Capitalist Pig" <root@localhost.> wrote in message
> > > > >news:lnfipvksijllub6jk84ucisvlb8anmdj92@xxxxxxxxxx
> > > > >> On Thu, 23 Oct 2003 22:32:23 -0500, "smithaa02" <sadf@xxxxxxxx>
> > wrote:
> > > > >> >
> > > > >> >I've debunked marginalism, STV, and supply and demand all
> > > > >> >in one.
> > > > >> >
> > > > >>
> > > > >> Wow, I'm impressed!
> > > > >
> > > > >You should be...
> > > > >
> > > > >>
> > > > >> >
> > > > >> >Price + utility can't equal price for that is circular logic.
> > > > >> >
> > > > >>
> > > > >> I wouldn't call it circular logic, I would call it a mistake. I
> have
> > > > >> no idea how you could come up with such silly definition.
> > > > >Price is where marginal benefits + utility (aka market cost) =
cost.
> > (The
> > > > >whole point of marginalism and STV) Cost is another term for price.
> > > So...
> > > > >price + utility = cost is circular logic.  Circular logic is
> > impossible,
> > > > >therefore supply and demand is junk.
> > > > >
> > > > >
> > > >
> > > >
> > > >
> > > >
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