Monday, October 30, 2023


  • An appreciation of Rob A. Bryer, a Marxist scholar of accounting.
  • I stumbled upon a You Tube channel and web site for the International Marxist Tendency. I do not know what I think about variants of Trotskyism.
  • Alessandro Roncaglia contrasts theories of crises in which tendencies exist in competitive markets towards equilibrium and in which such tendencies need not exist.
  • Some have YouTube channels trying to explain the strange ideas that mathematicians have come up with:
    • An Infinite Series episode explaining the existence of an infinite number of different size infinities. This PBS show was actually finite.
    • Numberphile on the same topic.
    • Josh is clear that we have to define how to extend our notation when talking about infinity.
    • Bri the math guy on the Saint Petersburg Paradox. He is very much about encouraging the student.
    • Not so serious.
    • Grant Sanderson on Newton's method and fractals.

Saturday, October 28, 2023

Economics, An Extraordinary Discipline

It seems to me that mainstream economists are socialized into ignorance and anti-scholarly norm. Plenty of economists exist that so many economists dismiss as 'fringe', and yet these dismissed economists excel on any scholarly criteria. It is not just that mainstream economists do not know of vast bodies of scholarship, produced by academics around the world. They also do not know that what they believe has long ago been shown to be without foundation. I have gone on like this before.

I might as well list the sort scholarly criteria I have in mind. I am thinking of economists with doctorates from well-known universities, who have published numerous journal articles and books from academic presses. They have edited such books and garnered many citations. They have supervised doctorate dissertations, where their students go on to other universities to do the same. They have been visiting professors at universities around the world, and maybe have occupied a named chair. They have been head of their department or otherwise provided successful service in academic administration. They have founded or co-founded journals and have been on the board of editors of various journals. They have provided policy advice and received festschrifts from those who have built on their work. They have written textbooks.

I should provide a small list of examples of scholars who rank on multiple criteria like the above:

I could expand this list, but I figure I do not want to embarrass too many with such fulsome praise.

This state of affairs may have something to do with abolishing the history of economic thought and any study of methodology. I do not expect recent mainstream economists to have read Smith's Wealth, Marx's Capital, or Keynes' General Theory. Sraffa's PoCbMoC is simultaneously an epoch-making book and virtually unknown. Fred Lee's A History of Heterodox Economics Challenging the mainstream in the twentieth century documents purges of economics departments.

I think mainstream economics are socialized to believe some questionable claims, based on rumors. For example, Marx was discredited by the marginal revolution. They cannot be expected to know of work in mathematical economics during the 1970s and 1980s formalizing Marx and empirical work that built on it. They'll believe Keynes was shown to be wrong by stagflation in the 1970s. The phrase 'bastard Keynesianism' is unknown, as are earlier theories of stagflation. The Arrow-Debreu-McKenzie model of intertemporal equilibrium is simultaneously the foundation of price theory and no longer central to economics.

But perhaps my perception of the sociology of economics is all wrong.

Wednesday, October 25, 2023

A Pattern For The r-Order Of Fertility With Intensive Rent And Markup Pricing

Figure 1: Wage Curves and Rent for an Example of Intensive Rent
The first man who, having enclosed a piece of ground, bethought himself of saying, 'This is mine', and found people simple enough to believe him, was the real founder of civil society. From how many crimes, wars and murders, from how many horrors and misfortunes, might not anyone have saved mankind by pulling up the stakes, filling in the ditch, and crying to his fellows, 'Beware of listening to this imposter; you are undone if you once forget that the fruits of the earth belong to us all, and the earth itself to nobody.' -- Jean Jacques Rousseau
1.0 Introduction

This post is a continuation of a previous example. Three commodities, iron, steel, and corn, are produced commodities. A single type of land exists, and three processes are available for producing corn on land.

The choice of technique corresponds to the selection of which processes are used in agriculture. Only the Alpha, Delta, and Epsilon techniques are feasibles for the given endowment of land and the requirements for use. Under Alpha, the land is only partially farmed. Land is not scarce and obtains no rent. Under Delta and Epsilon, the land is fully farmed, with two corn-producing processes being operated side-by-side. The second of these processes varies between Delta and Epsilon.

2.0 Choice of Technique

Prices of production are assumed to prevail, but markups over costs vary between industry and agriculture.

Figure 1 illustrates the wage and rent curves for this example. For a non-negative scale factor for the rate of profits up to the first switch point point, the Epsilon technique is cost-minimizing. At this switch point, the rent on land for Epsilon is zero, while it is positive for any smaller non-negative scale factor. This switch point is a fluke in that it is also the scale factor for the rate of profits at which the wage first turns positive for the Delta technique.

Between this first switch point and the switch point between Alpha and Delta, both the Alpha and Delta techniques are cost-minimizing. At the second switch point, the rent on land for Delta is zero. For a scale factor somewhat larger than at this switch point, no technique is cost-minimizing. Delta and Epsilon are feasible, but rent is negative for both of them. The wage for Epsilon is also negative. Alpha, on the other hand, is feasible, can pay a positive wage, and has a non-negative (zero) rent. Prices of iron, steel, and corn for Alpha are also positive in this range. Yet Alpha is not cost-minimizing.

Table 1: Cost-Minimizing Techniques
Lower Bound on rUpper Bound on rTechniques
0 percentr*Alpha has a positive wage
Delta has a negative wage
Epsilon has a positive wage and positive rent
Epsilon is uniquely cost-minimizing
r*r**Alpha has a positive wage
Delta has a positive wage and positive rent
Epsilon has a positive wage and negative rent
Alpha is non-uniquely cost-minimizing
Delta is non-uniquely cost-minimizing
r**rα, maxAlpha has a positive wage
Delta has negative rent
Epsilon has negative wage and negative rent
No cost-minimizing technique exists

Table 1 summarizes these claims about which techniques are cost-minimizing for which ranges of the scale factor for the rate of profits. Figure 2 graphs extra profits for each process at Alpha prices. Extra profits are the difference bewteen the price of the commodity produced by the process and the costs for commodity inputs, rent, and wages. The costs of inputs of iron, steel, and corn incur the going rate of profits for that industry, including markups. Extra profits can be positive or negative. As a check on the calculations, one can maybe see from the graph that extra profits are zero, neither positive nor negative, for the three processes comprising the Alpha technique. For a non-negative scale factor less than at the first switch point, extra profits can be made at Alpha prices by growing corn with the fifth process in the technology. For a scale factor exceeding that at the second switch point, but below the maximum, extra profits are obtained by growing corn with the fourth process in the technology. Thus, Alpha is only cost-minimizing between the switch points.

Figure 2: Extra Profits with Alpha Prices

Figure 3 shows the extra profits obtained for each process for the Delta and Epsilon techniques, in the left and right panes respectively. Extra profits are only graphed for each for the range of the scale factor for the rate of profits for which both the wage and rent is non-negative. Since four of the five processes are operated in Delta, or in Epsilon, extra profits are non-zero for only one process in each graph. And you can see both techniques are cost-minimizing for the full range of the graphed scale factor in each case.

Figure 3: Extra Profits with Delta or Epsilon Prices

3.0 Conclusion

For a markup in agriculture slightly lower than for the fluke case, a range of the scale factor for the rate of profits exists in which the Delta and Epsilon techniques are both cost-minimizing. For a markup slightly higher, no such range, not even a single point, exists. For the whole range of the scale factor in which the Delta technique exhibits a positive rate of profits and a positive rent, the Alpha technique is also cost-minimizing. And when the Alpha technique is cost-minimizing, the class of landlords cannot exist.

Friday, October 20, 2023

Ludwig Von Mises Wrong On Capital Theory

We compare the conditions of two isolated market systems A and B. Both are equal in size and population figures, the state of technological knowledge, and in natural resources. They differ from one another only in the supply of capital goods, this supply being larger in A than in B. This enjoins that in A many processes of production are employed with which the output is greater per unit of input than with those employed in B. In B one cannot consider the adoption of these processes on account of the comparative scarcity of capital goods. Their adoption wouId require a restriction of consumption. In B many manipulations are performed by manual labor which in A are performed by labor-saving machines. In A goods are produced with a longer durability; in B one must abstain from producing them although the lengthening of durability is obtained by a less than proportionate increase in input. In A the productivity of labor and consequently wage rates and the standard of living of the wage earners are higher than in B. -- Ludwig Von Mises Human Action, Chapter XVIII, Section 4

The above seems to be simply wrong, insofar as any sense can be made of it. What does it mean to say the supply of capital goods is larger on one island than another? These are heterogeneous quantities. Presumably some capital goods would be only made on one island, and other capital goods might be made only on the other. Von Mises even almost recognizes this in his remark about "labor-saving machines". Even if the same types of capital goods were made on both islands, it need not be the case that the quantities are uniformly larger on one island. In adapting production to final output, some quantities of some capital goods might be larger on one island while quantities of other capital goods might be smaller.

But put these objections aside. Remarks about "output is greater per unit of input" and a "higher standard of living of the wage earners" might give us a tautological definition of "the supply of capita1 goods". To simplify and to consider, for the sake of argument, a case in which some of these terms have a sharp meaning, suppose both islands A and B are in a stationary equilibrium, what Von Mises considers an evenly rotating economy. Suppose all labor is homogeneous and net output is in the same proportions.

Is the adoption of labor-saving machines, as compared to manual labor, associated with a greater output per unit of labor input? Is the use of capital goods for a longer period of time also associated with a greater output per unit of labor input? We know from numerical examples, the answer to the second question is otherwise.

Von Mises is not operating with a tautological definition of more or less capital goods, in which a greater supply results in a greater standard of living. He also makes assertions about physical properties of these capital goods. And, as a simple matter of logic - that praxeology he goes on about - he is wrong about these entailments.

Monday, October 16, 2023

A Three-Technique Pattern With Intensive Rent And Markup Pricing

Figure 1: Wage Curves and Rent for an Example of Intensive Rent
1.0 Introduction

This post is one in a series exploring variations of an example from Antonio D'Agata (1983).

This post demonstrates that at least one of my fluke cases can appear in a model of intensive rent by varying a parameter specifying relative markups among sectors. This post is only a start of exploring the parameter space of relative markups in a specific numeric example of intensive rent.

Suppose the rate of profits is given, subject to the constraint that the ratios of the rate of profits in agriculture to that in other industries are as specified. Then the wage can be one of two distinct levels. When the wage is at the lower level, then the rent per acre is higher and vice versa. On the other hand, an increased wage, when it is at the lower level is associated with an increased rate of profits.

2.0 Technology, Requirements for Use, Endowments, and Relative Markups

Table 1 presents coefficients of production in an example from D'Agata (1983). Only one type of land exists, and three processes are known for producing corn on it. The scarcity of land is shown by the possibility of two corn-producing processes being operated side-by-side in the cost-minimizing technique.

Table 1: The Coefficients of Production

Following D'Agata, assume that one hundred acres of land are available and that net output consists of 90 tons iron, 60 tons steel, and 19 bushels corn. The net output is also the numeraire. All three commodities must be produced for any composition of net output. Table 2 lists the available techniques. Only Alpha, Delta, and Epsilon are feasible for these requirements for use. Not all land is farmed and only one corn-producing process is operated under Alpha. Two corn-producing processes are operated together under Delta and Epsilon.

Table 2: Techniques
AlphaI, II, III
BetaI, II, IV
GammaI, II, V
DeltaI, II, III, IV
EpsilonI, II, III, V
ZetaI, II, IV, V

In the non-competitive case, the relative markups in different industries are taken as given. Let the rates of profits be in proportions of s1, s2, and s3, respectively.

3.0 Prices of Production

Prices of prodution can be defined for each technique. Each process operated in a technique contributes an equation in which the going rate of profits are obtained for that industry. The rate of profits in producing iron is s1 r. In steel, it is s2 r, and it is s3 r in the corn-producing processes. As in past posts, I call r the scale factor for the rate of profits.

For example, the following equations specify prices of production for the Delta technique:

(p1 a1,1 + p2 a2,1 + p3 a3,1)(1 + s1 r) + w a0,1 = p1
(p1 a1,2 + p2 a2,2 + p3 a3,2)(1 + s2 r) + w a0,2 = p2
(p1 a1,3 + p2 a2,3 + p3 a3,3)(1 + s3 r) + ρ c3 + w a0,2 = p3
(p1 a1,4 + p2 a2,4 + p3 a3,4)(1 + s3 r) + ρ c4 + w a0,3 = p3

In these equations, p1, p2, and p1 are the prices of iron, steel, and corn. The wage is denoted by w, and ρ denotes rent per acre. The techology provides the coefficients of production in this system of equation. The specification of the numeraire specifies another equation.

90 p1 + 60 p2 + 19 p3 = 1

One degree of freedom remains. I take the the scale factor for the rate of profits as externally given in this post.

In solving the above system, a linear combination of the two equations for corn-producing processes can be taken such that rent drops out. Prices of iron, steel, and corn and the wage can be found first. Then one can obtain rent per acre from either one of the corn-producing processes. Only ranges of the scale factor are considered in which prices, the wage, and rent are non-negative.

4.0 Choice of Technique

A technique is cost-minimizing, at a given scale factor for the rate of profits, if it is feasible and extra profits cannot be obtained by operating any process outside the technique. In evaluating a process to see if extra profits can be obtained by running it, one uses the prices of production determined by the technique and the scale factor for the rate of profits. Extra profits in the processes comprising the technique are zero, neither positive nor negative.

Figure 2: Extra Profits for Alpha Prices

Figure 2 shows that Alpha is cost-minimizing only at the scale factor for the rate of profits. If the scale factor were less than this, extra profits would be gained by combining the last corn-producing process with the first. That is, starting from the Alpha technique, capitalists in agriculture would adopt the Epsilon technique. As demonstrated by the right pane in Figure 3, Epsilon is cost-minimizing for any positive scale factor for the rate of profits up to that at the switch point. Delta is cost-minimizing from a scale factor for the rate of profits where the rate of profits turns positive up to the switch point.

Figure 3: Extra Profits for Delta and Epsilon Prices

Above the switch point, the rate of profits for Alpha is positive up to a certain maximum. In this range, extra profits can be made by operating process IV. The Beta technique would be selected if this process entirely replaced the corn-minimizing technique in Alpha. But Beta is not feasible. On the other hand, processes III and IV are operated side-by-side in the Delta technique. But in this range for the scale factor for the rate of profits, Delta obtains a negative rent. So no cost-minizing technique exists for a scale factor for the rate of profits greater than that at a switch point.

Table 3: Cost-Minimizing Techniques
Lower Bound on rUpper Bound on rTechniques
0 percent11.1 percentDelta has a negative wage
Epsilon has a positive wage and positive rent
Epsilon is uniquely cost-minimizing
11.1 percent43.9 percentDelta has a positive wage and positive rent
Epsilon has a positive wage and positive rent
Delta is non-uniquely cost-minimizing
Epsilon is non-uniquely cost-minimizing
43.9 percent65.5 percentDelta has negative rent
Epsilon has a positive wage and negative rent
Alpha has a positive wage
No cost-minimizing technique exists

Table 3 summarizes this analysis of the cost-minimizing technique for this fluke case with markup pricing and intensive rent. Before the switch point, the wage frontier consists of both the wages curves for the Delta and Epsilon techniques. The wage frontier does not exist after the switch point. D'Agata's original example, with competitive markets, also illustrates the possibility of a range of the rate of profits with multiple cost-minimizing techniques away from a switch point. And he also notes the possibility of the non-existence of a cost-minimizing technique.

5.0 Conclusion

Fluke cases are associated with qualitative change in the analysis of the choice of technique. Such fluke cases can be brought about by technological improves, that is, changes in coefficients of production. This numerical example illustrates that one of these fluke cases can also be brought about changes in market power between agriculture and industry. In this fluke case, three wage curves intersect at a single switch point.

If agriculture does not have quite as much market power as in the example, a range of the scale factor for the rate of profits exists where both Alpha and Delta are cost-minimizing. For the higher wage, landlords cannot exist since land is not scarce and obtains no rent. This variation in whether or not land is scarce with variations in distribution is not about net output. The level and composition of net output is taken as fixed in the above analysis. The fluke case is associated with the disappear of the range of the rate of profits in which Alpha is cost-minimizing. If agriculture has more market power than in the example, Alpha is never cost-minimizing.

This particular example of markup pricing and intensive rent can be further explored. What other fluke cases exist? What happens if the iron and steel industries do not have the same market power?

  • D'Agata, Antonio. 1983. The existence and unicity of cost-minimizing systems in intensive rent theory. Metroeconomica 35: 147-158'

Friday, October 13, 2023

Franz Fanon On The Need For People And Leaders To Learn

Optimism of the will leads me to hope that, with the misery we endure and cause, someday some people, including leaders of political movements and parties, will gain some wisdom. As I understand it, Frantz Fanon generalized principally from Algeria.

The settler is not simply the man who must be killed. Many members of the mass of colonialists reveal themselves to be much, much nearer to the national struggle than certain sons of the nation. The barriers of blood and race-prejudice are broken down on both sides. In the same way, not every Negro or Moslem is issued automatically a hallmark of genuineness; and the gun or the knife is not inevitably reached for when a settler makes his appearance. Consciousness slowly dawns upon truths that are only partial, limited, and unstable. As we may surmise, all this is very difficult. The task of bringing the people to maturity will be made easier by the thoroughness of the organization and by the high intellectual level of its leaders. The force of intellect increases and becomes more elaborate as the struggle goes on, as the enemy increases his maneuvers and as victories are gained and defeats suffered. The leaders show their power and authority by criticizing mistakes, using every appraisal of past conduct to bring the lesson home, and thus insure fresh conditions for progress. Each local ebb of the tide will be used to review the question from the standpoint of all villages and of all political networks. The rebellion gives proof of its rational basis and expresses its maturity each time that it uses a particular case to advance the people's awareness. In defiance of those inside the movement who tend to think that shades of meaning constitute dangers and drive wedges into the solid block of popular opinion, the leaders stand firm upon those principles that have been sifted out in the national struggle, and in the worldwide struggle of mankind for his freedom. There exists a brutality of thought and a mistrust of subtlety which are typical of revolutions; but there also exists another kind of brutality which is astonishingly like the first and which is typically anti-revolutionary, hazardous, and anarchist. This unmixed and total brutality, if not immediately combated, invariably leads to the defeat of the movement within a few weeks.

The nationalist militant who had fled from the town in disgust at the demagogic and reformist maneuvers of the leaders there, disappointed by political life, discovers in real action a new form of political activity which in no way resembles the old. These politics are the politics of leaders and organizers living inside history who take the lead with their brains and their muscles in the fight for freedom. These politics are national, revolutionary, and social and these new facts which the native will now come to know exist only in action. They are the essence of the fight which explodes the old colonial truths and reveals unexpected facets, which brings out new meanings and pinpoints the contradictions camouflaged by these facts. The people engaged in the struggle who because of it command and know these facts, go forward, freed from colonialism and forewarned of all attempts at mystification, inoculated against all national anthems. Violence alone, violence committed by the people, violence organized and educated by its leaders, makes it possible for the masses to understand social truths and gives the key to them. Without that struggle, without that knowledge of the practice of action, there's nothing but a fancy-dress parade and the blare of the trumpets. There's nothing save a minimum of readaptation, a few reforms at the top, a flag waving: and down there at the bottom an undivided mass, still living in the middle ages, endlessly marking time. -- Frantz Fanon, The Wretched of the Earth, Chapter 2: Spontaneity: its strengths and weaknesses

I think by 'violence' Fanon (and Georges Sorel before him) are talking about organized direct action.

Tuesday, October 10, 2023


The First Of A Robert Paul Wolff Series Of Lectures On Marx

Saturday, October 07, 2023

Marx Against A Simple Labor Theory Of Value

Marx distinguishes, at least, between market prices, prices of production, and labor values. For the first volume of Capital, Marx assumes market prices bob around or tend to labor values, not prices of production. I think Marx nowhere says he is assuming the organic composition of capital does not vary among industries. He adopts the labor theory of value in when considering capitalist production as a whole so as to address the question of how owners of capital are able to regularly obtain a profit. He wants this explanation to apply when capitalists are not cheating each other. Nor are they cheating the workers.

I have noted before a few passages in the first volume where Marx demonstrates that he is making a simplification, to be dropped in volume 3. Consider the following:

"If prices actually differ from values, we must, first of all, reduce the former to the latter, in other words, treat the difference as accidental in order that the phenomena may be observed in their purity, and our observations not interfered with by disturbing circumstances that have nothing to do with the process in question. We know, moreover, that this reduction is no mere scientific process. The continual oscillations in prices, their rising and falling, compensate each other, and reduce themselves to an average price, which is their hidden regulator. It forms the guiding star of the merchant or the manufacturer in every undertaking that requires time. He knows that when a long period of time is taken, commodities are sold neither over nor under, but at their average price. If therefore he thought about the matter at all, he would formulate the problem of the formation of capital as follows: How can we account for the origin of capital on the supposition that prices are regulated by the average price, i. e., ultimately by the value of the commodities? I say 'ultimately', because average prices do not directly coincide with the values of commodities, as Adam Smith, Ricardo, and others believe." -- Marx, Capital, volume 1, last footnote in chapter 5.

Marx above distinguishes between what he will come to call prices of production and labor values. Labor values, for Marx, are important for the economy as a whole. But individual prices are attracted by prices of production, not labor values. Or again:

"The calculations given in the text are intended merely as illustrations. We have in fact assumed that price = values. We shall, however, see, in Book III, that even in the case of average prices the assumption cannot be made in this very simple manner." -- Marx, Capital, volume 1,last footnote in chapter 9, section 1

He is explicit above that the calculations are examples, not literally true. But the occassion of this post was when I stumbled across the following:

"The law demonstrated above now, therefore, takes this form: the masses of value and of surplus value produced by different capitals - the value of labour power being given and its degree of exploitation being equal - vary directly as the amounts of the variable constituents of these capitals, i.e., as their constituents transformed into living labour power.

This law clearly contradicts all experience based on appearance. Everyone knows that a cotton spinner, who, reckoning the percentage on the whole of his applied capital, employs much constant and little variable capital, does not, on account of this, pocket less profit or surplus value than a baker, who relatively sets in motion much variable and little constant capital. For the solution of this apparent contradiction, many intermediate terms are as yet wanted, as from the standpoint of elementary algebra many intermediate terms are wanted to understand that 0/0 may represent an actual magnitude. Classical economy, although not formulating the law, holds instinctively to it, because it is a necessary consequence of the general law of value. It tries to rescue the law from collision with contradictory phenomena by a violent abstraction. It will be seen later how the school of Ricardo has come to grief over this stumbling-block. Vulgar economy which, indeed, 'has really learnt nothing', here as everywhere sticks to appearances in opposition to the law which regulates and explains them. In opposition to Spinoza, it believes that 'ignorance is a sufficient reason'." -- Marx, Capital, volume 1, Chapter 9, Rate and mass of surplus value.

I would like to say volume 1, being the only volume of Capital Marx published in his lifetime, should be central in understanding his theory. The above is another demonstration in opposition to this view, at least as far as the analysis of capital goes. In a even larger project, Marx intended to "examine the system of bourgeois economy in the following order: capital, landed property, wage-labour; the State, foreign trade, world market." It is arguable that some of these steps were incorporated into Capital, but he never arrived at the last three.

No where in this post do I address Marx's curious rhetoric. He talks about real illusions, uses Hegelian terminology, and a lot of fierce irony.

As a throwaway comment, let me note one area where I think Marx is weak. Why do the workers consitute a universal class? Why did Marx think the next social revolution would be the last, ending humanity's prehistory? He provides a philosophical derivation of the role of the working class in such early works as Critique of Hegel's Philosophy of Right and The German Ideology. This derivation in tension with the empiricalism that one should build on the materialist theory of history. Since then, we have seen Lenin and Mao look at the role of the peasants in revolutions in less developed areas of the world. Franz Fanon looked at the global south and the revolutions accompanying decolonization. Michael Hardt and Antonio Negri talk about the 'multitude'. You may have noticed that I do not talk much about praxis. But do workers around the world still have a privileged position in hopes for social change?

Tuesday, October 03, 2023

Jeremy Rudd: "Why I hate economics"

Jeremy Rudd addresses the Cambridge Society for Economic Pluralism

Jeremy Rudd has written:

Mainstream economics is replete with ideas that 'everyone knows' to be true, but that are actually arrant nonsense. For example, 'everyone knows' that:

  • aggregate production functions (and aggregate measures of the capital stock) provide a good way to characterize the economy's supply side;
  • over a sufficiently long span - specifically, one that allows necessary price adjustments to be made - the economy will return to a state of full market clearing; and
  • the theory of household choice provides a solid justification for downward-sloping market demand curves.

None of these propositions has any sort of empirical foundation; moreover, each one turns out to be seriously deficient on theoretical grounds1. Nevertheless, economists continue to rely on these and similar ideas to organize their thinking about real-world economic phenomena. No doubt one reason why this situation arises is because the economy is a complicated system that is inherently difficult to understand, so propositions like these - even though wrong - are all that saves us from intellectual nihilism. Another, more prosaic reason is Stigler's (1983, p. 541) equally nihilistic observation that 'it takes a theory to beat a theory.'

Is this state of affairs ever harmful or dangerous? One natural source of concern is if dubious but widely held ideas serve as the basis for consequential policy decisions2.

1 For a useful brief against production functions, see Felipe and Fisher (2003); for the case against capital aggregates, see Brown (1980). The idea that the inherent stability of the economy is a concomitant of general-equilibrium theory is difficult to entertain seriously after giving Fisher (1983) close study; see Grandmont (1982) for some related macroeconomic arguments. Finally, Hildenbrand (1994) provides a sobering corrective to first-year demand theory.

2 I leave aside the deeper concern that the primary role of mainstream economics in our society is to provide an apologetics for a criminally oppressive, unsustainable, and unjust social order.

The above quote is from a paper about inflations expectations. I wondered how far and on what grounds Rudd thinks this arrant nonsense extends. The talk in the video linked to the top of this post helps answer this question.