tag:blogger.com,1999:blog-8595404115121834255.post8807942033570408414..comments2024-03-28T03:24:05.678-04:00Comments on NAKED KEYNESIANISM: Krugman on the meaning of neoclassical economicsMatias Vernengohttp://www.blogger.com/profile/09521604894748538215noreply@blogger.comBlogger29125tag:blogger.com,1999:blog-8595404115121834255.post-54418954250723833332012-08-30T06:39:17.849-04:002012-08-30T06:39:17.849-04:00Sraffa favours land value tax?Sraffa favours land value tax?Anonymoushttps://www.blogger.com/profile/07017137111072698253noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-35410373154930298992012-08-30T06:37:43.656-04:002012-08-30T06:37:43.656-04:00This comment has been removed by the author.Anonymoushttps://www.blogger.com/profile/07017137111072698253noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-91268456223120292622012-08-29T14:08:02.445-04:002012-08-29T14:08:02.445-04:00Entering the industry means exactly that. A firm e...Entering the industry means exactly that. A firm enters an industry in search of profits above normal. Still not sure what a land industry is? <br /><br />Regarding rent theory, which is a necessary part of the theory of price and distribution, only with Sraffa you find a coherent solution to the problems with the surplus approach. So you need to read Sraffa. By the way, Marco Piccioni and Fabio Ravagnani have a great paper in the Centro Sraffa Qauderni di Ricerca on "Absolute Rent and the Normal Price of Exhaustible Resources."Matias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-39143283593179272102012-08-29T14:03:49.228-04:002012-08-29T14:03:49.228-04:00There is some work on that, but you're right t...There is some work on that, but you're right that not enough given its relevance.Matias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-14307654076030018142012-08-29T09:57:57.664-04:002012-08-29T09:57:57.664-04:00"...prices of production can still explain th..."...prices of production can still explain the structural or trend element in the determination of firm prices."<br /><br />That sounds right to me. Although again, I stress the importance of advertising which is a whole different sphere and not dealt with by the Sraffians.TheIllusionisthttps://www.blogger.com/profile/17642837989235595346noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-71487558739344243942012-08-29T09:27:15.353-04:002012-08-29T09:27:15.353-04:00What do you mean then by "entering the indust...What do you mean then by "entering the industry?" Or do you mean that land owner is not a "capitalist?"<br /><br />You don't have to go to Straffa to understand land rents. People from Aristoteles to "institutionalists" told us everything there is to know.Anonymoushttps://www.blogger.com/profile/07017137111072698253noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-54092577420376302282012-08-29T09:15:42.706-04:002012-08-29T09:15:42.706-04:00Not sure what you mean by land industry. Land is n...Not sure what you mean by land industry. Land is not a produced means of production, though. For prices of non-reproducible means of production there are a few Sraffian models. There is a chapter in Kurz and Salvadori's "Theory of Production."Matias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-71128805130055459512012-08-29T09:12:00.497-04:002012-08-29T09:12:00.497-04:00The relation of Sraffian prices and full costs and...The relation of Sraffian prices and full costs and the barriers to entry tradition can be thought in this way, irrespective of what Fred says. Classical prices of production are the centre of gravitation for market prices and are determined by the costs of the dominant techniques and the state of distribution. They provide a general theory of the structural determinants and limits for the trend of market prices in all types of markets. Normal cost or full cost pricing which is a generalization of the descriptions given by some firms as to how they actually calculate their own prices based on their own costs starting with the work of hall and Hitch and the Oxford Economist's Research Group. The normal costs of the firms, do not in general, as noted by Franklin Serrano in a post in this blog, take into consideration the dominant technique or the potential entrants. However, prices of production can still explain the structural or trend element in the determination of firm prices. That was the sort of thing that John Eatwell taught back in the 1990s at the New School. Mind you, I have great respect for Fred's work, and I'm fine with not agreeing 100% with him on this. If your point is that he doesn't agree with my interpretation, that's a given. My point is that Eatwell's interpretation is also possible. We can certainly discuss then the merits of both views.Matias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-85365717692042470682012-08-28T22:27:13.117-04:002012-08-28T22:27:13.117-04:00Dr. Vernengo, if one follows Lee's model and w...Dr. Vernengo, if one follows Lee's model and what Lee says specifically, then he does away with the short run/long run dichotomy altogether, which is why the long period approach has no conceptual meaning whatsoever (for Lee). Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-25277885686881499932012-08-28T19:16:12.214-04:002012-08-28T19:16:12.214-04:00Okay, but if there are long-run prices, do these r...Okay, but if there are long-run prices, do these really have to be due to competition? Could they not be due to price leadership instead, as I suggested above?<br /><br />Take a Japanese car. Will the long-run prices for a Nissan, Toyota and a Honda (of a given "class") converge? To some extent, I expect they would. However would this be due to "competition"? I doubt it. More likely it would have to do with price leadership.<br /><br />This doesn't, in my opinion, rule out either approach. After all, if Honda is the price leader, it's leadership must still be based on Sraffian input costs (together with market share, advertising etc. Sraffa leaves these very important aspects out). But it suggests that long-run prices exist, but they generally rely on price leadership and not on competitive dynamics.TheIllusionisthttps://www.blogger.com/profile/17642837989235595346noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-63466802980547050912012-08-28T18:56:18.631-04:002012-08-28T18:56:18.631-04:00No need to be sorry, you have the right to your op...No need to be sorry, you have the right to your opinion. Mind you I'm not talking about methodology. I'm talking about concrete things. Prices of production (long term) do reflect the way the world actually works. Of course there are imperfections (barriers to entry that imply that free entry, competition) does not work completely. And there is evidence. But from a methodological point of view, if you say that you only believe in the short run, then, like Krugman and New Keynesians, you are an imperfectionist.Matias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-54060761760709155992012-08-28T18:48:05.009-04:002012-08-28T18:48:05.009-04:00- If profits were higher in a particular sector, c...- If profits were higher in a particular sector, capitalists would try to gain from those opportunities entering the industry, -<br /><br />Land rents are higher every year, but there is no land industry.Anonymoushttps://www.blogger.com/profile/07017137111072698253noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-56067735528051888492012-08-28T18:38:00.701-04:002012-08-28T18:38:00.701-04:00Sorry to butt in, but aren't cost-plus pricing...Sorry to butt in, but aren't cost-plus pricing and Sraffian theory going in different directions? Cost-plus pricing is coming at the problem from a Kalackian approach that largely rejects competition in favour of "degrees of monopoly". So, when Matias says:<br /><br />"Note that if you don't have the long run equilibrium with a tendency (not necessarily something that is achieved in the real world) to a uniform rate of profit, the very notion of competition is difficult to defend. "<br /><br />When Matias says this he's entirely right. Post-Keynesians -- from the Kaleckian tradition -- generally regard competition as an exception and monopoly to be the general rule. But Sraffians, it seems, continue to aim at the uniform rate of profit and hence competition (free entry).<br /><br />Perhaps this is where we can reconcile them to some extent. But it would have to be based on price leadership, not competition. Firms would have to "get in line" with price leaders in the market and this would lead them to gravitate toward a long-term price. The price leader's price could then be seen to rely on Sraffian pricing.<br /><br />(However, I'd also point out the the price leader's price would rely on the degree of advertising monopoly etc. that it had built up too...)TheIllusionisthttps://www.blogger.com/profile/17642837989235595346noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-67057162868886888172012-08-28T17:50:46.200-04:002012-08-28T17:50:46.200-04:00I'm sorry dr. Vernengo but that is completely ...I'm sorry dr. Vernengo but that is completely wrong. His pricing theories and long period prices have a completely different methodology at play, which comes to fundamentally different meanings and results. I recommend you read stuff on market governance, like Granovetter 1985, Richardson 1967?, Campbell et al. 1991, Fligstein 1996 and 2001 (architecture of markets is name of his book) to understand why Lee comes to the conclusions he does. His pricing theory can say nothing about the economy without a theory of market governance, which as you stated without one you can't defend the notion of competition! Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-8630298800846068712012-08-28T16:51:15.990-04:002012-08-28T16:51:15.990-04:00I know that DaRkJaWs, but that doesn't mean th...I know that DaRkJaWs, but that doesn't mean that there couldn't be compatibility between the Post keynesian pricing theories based on full cost pricing and Sraffian prices. That would be my view. Note that if you don't have the long run equilibrium with a tendency (not necessarily something that is achieved in the real world) to a uniform rate of profit, the very notion of comptetition is difficult to defend. Further, then one can always fall into the argument that interventions are necessary because of imperfections. Finally, note that it is the modern neoclassical economics, Arrow-Debreu, which was forced to rely on a short run solution because of the defeat in the capital debates.Matias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-64149273313592267502012-08-28T16:40:04.733-04:002012-08-28T16:40:04.733-04:00Dr. Vernengo, Fred Lee explicitly says that there ...Dr. Vernengo, Fred Lee explicitly says that there is no long period pricing in his models, and says why that is so. You said that models without long period pricing is not serious economics. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-36539529526695734712012-08-28T15:40:57.519-04:002012-08-28T15:40:57.519-04:00Fair enough, but like I said his charactisation no...Fair enough, but like I said his charactisation no different from most other sources.<br /><br />Well Smith's self interested baker is quite different from the homo economicus that people usually associate with neoclassical economics, especially as it pertains to models.<br /><br />Self interest does not imply rationality.<br /><br />Cheers for the link Ill check it out!realpolitic00https://www.blogger.com/profile/00645482294202439511noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-444892959729823172012-08-28T15:24:57.532-04:002012-08-28T15:24:57.532-04:00Link to Bharadwaj's book here http://books.goo...Link to Bharadwaj's book here http://books.google.com/books/about/Classical_political_economy_and_rise_to.html?id=tM_rAAAAMAAJ&redir_esc=yMatias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-90293969515006000552012-08-28T15:23:43.246-04:002012-08-28T15:23:43.246-04:00Nope. He just says that the neoclassical view star...Nope. He just says that the neoclassical view started with the marginalist revolution, which happened around the 1870s. But he misses the point about the definition of what changed in the 1870s. I just showed you that the two things, rational maximizing behavior and equilibrium, that he said started with marginalism, actually where present in Smith, a whole century before neoclassical economics. I highly recommend the little book by Krishna Bharadwaj on "Political Economy and the Rise of Dominance of Supply and Demand Theories."Matias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-4777644316505055432012-08-28T15:18:19.199-04:002012-08-28T15:18:19.199-04:00Also, hi!Also, hi!realpolitic00https://www.blogger.com/profile/00645482294202439511noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-8146209767618543882012-08-28T15:16:33.116-04:002012-08-28T15:16:33.116-04:00Doesnt Krugman address this when he says...
"...Doesnt Krugman address this when he says...<br /><br />"There’s a historical definition, having to do with the “marginal revolution” of the late 19th century and all that"<br /><br />I understand the explanation he gives may appear simplistic, but it is the same definition you will find in most other sources, the top results when you google 'neoclassical economics definition' all agree with Krugman.<br /><br />Now you could argue that they are all wrong too, but to ascribe this definition to Krugman soley is unfair. It just looks like you have an axe to grind with him.realpolitic00https://www.blogger.com/profile/00645482294202439511noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-92137471979591746912012-08-28T14:16:55.004-04:002012-08-28T14:16:55.004-04:00Hi Realpolitic00. Adam Smith, for example, thought...Hi Realpolitic00. Adam Smith, for example, thought that: "It is not from the benevolence of the butcher the brewer, or the baker that we expect our dinner, but from their regard to their own interest" (WN, book1, ch. 2, 2nd paragraph available here http://www.marxists.org/reference/archive/smith-adam/works/wealth-of-nations/book01/ch02.htm). Hence, self-interest was part of the theory. He was not neoclassical, since in no place he thought that supply and demand determined the long term equilibrium or natural price, or that the optimal level of employment (full utilization of labor) would take place. As with all classical authors wages were exogenous, and in his case the level of activity seemed to be connected to demand (the division of labor, which determined the Wealth of Nations, was after all determined by the size of the market). The point is that neoclassical economics is about the substitution principle, which guarantees that prices change according to relative scarcities and provide efficient outcomes. Maximiation and equilirbium are necessary, but not sufficient, and other theories have egoistical behavior and equilibrium without neoclassical results.Matias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-23124254339146933312012-08-28T14:06:41.625-04:002012-08-28T14:06:41.625-04:00From Investopedia,
'An approach to economics...From Investopedia, <br /><br />'An approach to economics that relates supply and demand to an individual's rationality and his or her ability to maximize utility or profit.'<br /><br />Sounds a lot like Krugman's definition... 'maximization and equilibrium'.<br /><br />Forgive me if I misunderstand your post but how is his definition incorrect?realpolitic00https://www.blogger.com/profile/00645482294202439511noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-78734708593224549122012-08-28T13:48:24.309-04:002012-08-28T13:48:24.309-04:00Nope. Fred's models are perfectly compatible w...Nope. Fred's models are perfectly compatible with Sraffian analysis.Matias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-23777153690599513242012-08-28T13:46:26.251-04:002012-08-28T13:46:26.251-04:00You're suggesting that Fred lee's models a...You're suggesting that Fred lee's models aren't serious? I would say that without agency that the surplus approach is without conceptual meaning. <br /><br />neoclassical economics was obviously helped along in developing their market clearing models from the classical natural price approach. No one could dispute that neoclassical economics twisted the natural price approach. And the only thing you could say about Keynes is that they co-opted his approach. Anonymousnoreply@blogger.com