| Neoclassical Political Economy |
You may have seen the above overly polite video.
I have not done this in a while, even before the pandemic. I used to, when I visited an academic bookstore or a college library, skim through textbooks, concentrating on introductory or intermediate microeconomics. Economics is in an extraordinary state, where the textbooks are full of nonsense that has been known to be logically invalid for half a century.
Here is an example. David D. Friedman (Milton's son) has made the 1990 or second edition of his Price Theory: An Intermediate Text available online. And it contains this manure:
This conclusion is useful for seeing how various changes affect the distribution of income. Suppose the number of carpenters suddenly increases, due to the immigration of thousands of new carpenters from Mexico. Both before and after the change, carpenters receive their marginal revenue product. Both before and after, they receive a wage equal to the marginal value of the last hour of leisure they give up.
But the wage after the migration is lower than the wage before. Since the supply of carpenters is higher than before, the equilibrium wage is lower. At that lower wage more carpenters are hired and their marginal product is therefore lower. With lower wages, the existing carpenters work fewer hours (assuming a normally shaped supply curve for their labor) and, when they are working fewer hours, have more leisure and value the marginal hour of leisure less. Some carpenters--those with particularly good alternative occupations--find that, at the lower wage, they are better off doing something else. The marginal cost to the worker of working an additional hour falls, either because the marginal hour is worked by one of the old carpenters who is now working fewer hours or because the marginal carpenter is now one of the new immigrants. -- David D. Friedman Chapter 14
Is Friedman a liar or a fool?
I have indeed recently described again M Friedman as «a shameless propagandists regurgitating old and discredited claims, and being given a huge platform only because he was vocally on the side of rentiers and against "communism"» :-).
ReplyDeleteThe "old and discredited claims" are essentially those of JB Clark, as enthusiastically endorsed also by the improperly named "Marginal Revolution" people.
«Economics is in an extraordinary state, where the textbooks are full of nonsense that has been known to be logically invalid for half a century.»
ReplyDeleteI guess that you remember my usual reference to this story:
http://rwer.wordpress.com/2013/06/30/doctor-x-pure-shit-and-the-royal-societys-motto/
I am amused by your evolution over the many years I have infected/infested the comment section of your blog, where you seemed initially dismissive of my "conspiracy theories" and outrage about the manufactured state of "mainstream Economics" and the "sell-side" interests that have driven it into that state. I think this was my fist "interference" with your tranquillity (even if my "nick" has been replaced by "Anonymous"):
http://robertvienneau.blogspot.com/2006/08/i-couldnt-make-this-up.html
With time your surprise at that seems to me to have turned into similar "conspiracy theories" and feelings. We can afford having those because we are both spectators and our careers seem to be in other areas.
Unfortunately I guess both of us cannot do what would would turn the tide a bit, that is to endow chairs in Sraffian political economy or the history of political economy studies, or fund a new "Joan Robinson" building in some USA university, or offer generous consultancies to keynesian or marxian political economists. Only trade unions and political parties would have the resources to counter the flood of "sell-side" money, but then they have been largely taken over by "triangulators".
I have just reread the article in the first month of your blog:
ReplyDeletehttp://robertvienneau.blogspot.com/2006/04/
Interesting now as then, but in 14 years the state of mainstream "sell-side" Economics has changed about as much as in the past 40 years, that is not much, despite the brave attempts by some to circumvent it by creating new "SOMETHING economics" fields.
v«The "old and discredited claims" are essentially those of JB Clark»
ReplyDelete«I think this was my fist "interference" with your tranquillity»
For various reasons this blog makes me feel "sentimental" :-) so I was looking at some of my early posts about the crucial importance of JB Clark's degradation of political economy studies into Economics, and I found this cmment on a shocking admission by B DeLong, a “card-carrying neoliberal” (at least at the time) nonetheless, from 5 years ago:
https://www.bradford-delong.com/2015/12/kevin-hoover-the-methodology-of-empirical-macroeocnomicshttpslarspsyllwordpresscom20151119is-macroeconomics-.html#comment-6a00e551f08003883401b7c7fcd5a7970b
“«representative-agent modeling and utility-based "microfoundations" was always a game of intellectual Three-Card Monte»
It is actually a Three-Parable Monte, where the three parables are those from JB Clark. [...] This paper explains a large part of the story of the "three parables": [...] "Whatever Happened to the Cambridge Capital Theory Controversies?"”
and I realized that (OOOPS) I made for many following years a terminological mistake calling them "fables" when the established term is "parables"; they were listed by P Samuelson as “parables” in his failed attempt to refute the demolition of JB Clark's (hand-waving) "theory" of capital and production in 1962; JB Clark's three parables are reported in that “Whatever happened” paper, and here I quote them in all their ridiculousness:
«With the usual assumptions, like exogenously given resources and technology, constant returns to scale, diminishing marginal productivity and competitive equilibrium, this simple model exhibits what Samuelson (1962) called three key “parables”:
1) The real return on capital (the rate of interest) is determined by the technical properties of the diminishing marginal productivity of capital;
2) a greater quantity of capital leads to a lower marginal product of additional capital and thus to a lower rate of interest, and the same inverse, monotonic relation with the rate of interest also holds for the capital/output ratio and sustainable levels of consumption per head;
3) the distribution of income between laborers and capitalists is explained by the relative factor scarcities/supplies and marginal products.»
BTW that “explained” in the third is a bit weaker than JB Clark's claim (quoted in a previous post of mine), it actually means "uniquely and exactly determined".