Tuesday, March 06, 2007

Just the Facts, Ma'm

As far as I am concerned, the marginal variable cost curve for an industrial plant is typically a reverse L-shape. Industrial firms generally practice some sort of administrative, full-cost, or markup pricing policy. Empirical work on this point, I guess, goes back at least to Hall and Hitch. Post Keynesians will look back to Kalecki. (Sraffians have argued that Kaleckian models should be modified to incorporate a dependence of relative prices on distribution.) Steve Keen cites a recent book by Alan Blinder et al to the same point. And James Galbraith's empirical results suggest Kalecki was on to something in his classification of economic sectors.

Tyler Cowen wants to know how to avoid teaching students these ideas. I do like “Person’s” query in that thread:
”Stupid question: how about just admitting that businesses price based on (expected) average cost, instead of carving out all these epicycles? I'm just asking, is all.”
(Tyler Cowen is amusing here, too.)

6 comments:

Anonymous said...

What a wonderfully surreal read. I do love neo-classical economists, "scientists" who refuse to base their "science" on generalisations based on empirical evidence...

It is not a science, it is a religion.

I would say that this kind of nonsense flows from the social role of economics, namely its justification of the current system (namely the income and power of the owners of land and capital).

And I do love the notion that unions harm working class people. Who knew that bosses and their paid politicians were so philanthropic? All the union-busting is really about helping workers, you see...

Shame about the reality of stagnating wages in the US for the last thirty odd years while productivity has grown. Best not to mention that particular piece of empirical evidence...

It would be funny if it were not for the human misery it reflects (and helps justify).

Iain

YouNotSneaky! said...

As far as I am concerned, the marginal variable cost curve for an industrial plant is typically a reverse L-shape.

Hey! We agree on something! Though I suspect I'm thinking of a cursive, lower case l, while you're thinking of a upper case, kinked L.

Taylor's response on this one was just weird. I had trouble figuring out what exactly he was saying, aside from linking to some papers which were barely relevant.

I'm not sure there's any definite ideological conclusions that follow this, contra commentator above.

YouNotSneaky! said...

Also I don't know who "Person" is but contrarianism seems to be the schtick. Here he is on Jane Galt and employer's firing union organizers:

Why *shouldn't* an employer fire someone who thinks cartelization of his labor type is better way to increase his compensation than threatening to work for a competitor?

I'm just asking, is all.


Or at least I don't think he's your fellow ideological brother.

Robert Vienneau said...

Radek, thanks for pointing out that curious quote from "Person". I do agree with Iain to some extent. It is easy to find examples of behavior by economists that seem hard to interpret as anything other than propaganda for class interests.

Adi the Austrian said...

Sraffian economics sometimes seem to be a religion too...

Some commentators suggests that economists are serving as intellectual bodyguards of capitalism (like German Historical School used to be for House of Hohenzollern in Deutsche Reich or John Commons for Gompers of AFL). Marginal productivity theory of distribution of income is often cited example about this type of justification.

But then one may justly ask if it is worthwhile to base ones system on different interests of classes and even different contents of sciences depending on ones class background. No one can argue if one takes this as a starting point of his axiomatic system. Consequences will only show what happens if world view is based on (alleged) differences on interests between social classes.

Late economist von Mises had often written about the errors committed by socialists when accusing others of serving narrow class interests or doing biased science.

Robert Vienneau said...

I suppose Adi has in mind, in particular, Mises attack on "Polylogism" (Human Action, Chapt. 3, Sect. 2 and 3, 3rd revised edition, 1966). I think Mises is never even near to accurate in presenting the views of his opponents. He isn't anywhere near in that section.