Friday, October 04, 2013

Thou Shall Listen To Economists: The Number One Principle Advocated By Economists

Alex Tabarrok, as I understand it, is an economist in the economics department at George Mason University. Brad DeLong has been famously feuding with David Graeber, an anthropologist and anarchist (also known as - to those who speak english - a libertarian), but not an economist. Would it be more or less to DeLong's credit for that background to explain this agreement with Tabarrok's incompetent stupidity? I am not going to link to any of my multiple demonstrations that there is no such thing as a marginal productivity theory of distribution. Not only do I have mathematical proofs, I am in agreement with what good neoclassical economists, from Leon Walras to Christopher Bliss, have explicitly stated.

I am not sure what I think of this article, by Peter Frase, in Jacobin. I am in agreement with the conclusion. I am also in agreement that, in practice, actually existing capitalism contains lots of markets that are not competitive1, in some sense. But I wish more would note that even if markets were competitive, the conclusions of the market fundamentalists would not follow2. It is a major error of contemporary mainstream economics to think that everything would be great if only markets were competitive3.

  1. At least two theories of competitive markets exist: (1) The classical theory, in which competitive markets exhibit no barriers to entry, and a tendency exists, across and within industries, towards a uniform rate of profits. (2) The neoclassical theory, in which firms take market prices as given and, perhaps, do not suffer from any problems connected with limits to information, computation, etc.
  2. For example, Piero Sraffa can be read as putting forth a model, in his 1960 book, in which markets are competitive and in which exogenous political forces set the functional distribution of income.
  3. Different schools argue over how important, in practice, deviations from competition are and whether governments can correct these deviations.

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