Tag Archives: Methodology of Economics

Duncan Foley participated in a 2003 conference comparing and contrasting general equilibrium theory with long period models developed by advocates of the Cambridge capital critique. This is from the wrap-up discussion on the last day. "I am in a somewhat peculiar position because due to certain idiosyncrasies of my education I never learned 'neoclassical economics'. The economic theory that I learned wasfrom Herbert Scarf and it was couched entirely in terms of the abstract general...

This passage suggests to me that, in economics, one cannot expect to find event regularities from surface level data: "The really important difference between us and our natural science colleagues is illustrated by the fact that we never reach down to constants like the speed of light and of sound in a particular medium, or the specific weights of atoms and molecules. We have nothing corresponding to the universally valid measurements of energy, voltage, amperes, and so on. The...

Because of its treatment of capital. Other answers are possible. This post draws heavily on the work of Pierangelo Garegnani. I start with a (parochial) definition of economics: "Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses." -- Lionel Robbins (1932) The scarce means are the factors of production: land, labor, and capital. Land and labor are in physical terms, in units of acres and person-years,...

1.0 Introduction Broadly speaking, the history of political economy contains two approaches to value and distribution. For purposes of this post, I do not distinguish between classical and Marx's political economy. Institutionalists and those who know about German historical schools, for example, might have a complaint about being ignored. This post is quite unoriginal. I thought I would just record these properties of two approaches. 2.0 Marginalism Marginalist economics is about the...

Economists proved over half a century ago that certain stories are unfounded in the theory. For example, one might think that if some workers are involuntarily unemployed, a drop in real wages would lead to a tendency for the labor market to clear. The Cambridge Capital Controversy revealed some difficulties. In response, some economists turned to the Arrow-Debrue-McKenzie model of intertemporal equilibria in which it is not clear that one could even talk about such concepts. The...

[embedded content]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...

Suppose one rejects the labor theory of value as a theory of prices. Or, even more, one could reject Marx's theory of value in volume 1 of Capital. Still, one could elaborate the theory of prices of production. In my published works, I have tried to extend the theory a step or two. And the theory of prices of production is opposed to a marginalist theory, a theory of supply and demand, if any such coherent theory exists. In this post, I offer one explanation of the setting of the theory...

1.0 Introduction In his book, Human Action, Ludwig von Mises defines 'praxeology' as the science of human action. He says that it is a subject of formal reasoning. Human action is conscious action in which the actor attempts to decrease felt uneasiness. 'Catallactics' is a subset of praxeology treating market exchanges. But von Mises is quite confused. 2.0 Does Formal Reasoning Enlarge Our Knowledge? Von Mises does not know. At one point, he says formal reasoning does enlarge our...

1.0 Introduction Kurz and Salvadori (1995) explain prices of production with two methods of analysis: the direct method and the indirect method. The indirect method, for the circular capital case, involves the creation of the wage frontier, the most well-known diagram to come out of Sraffa (1960). The direct method characterizes a system of prices of production by axioms, while the indirect method suggests algorithms for finding cost-minimizing techniques. 2.0 The Direct Method In both...

1.0 Introduction A question has arisen elsewhere. Why, except for an interlude during the post war golden age, has a nineteenth century orthodoxy dominated economics departments and treasury departments around the world? Here I do not investigate the details of this orthodoxy or if it does dominate. 2.0 An Authoritarian Point of View Some people believe that some are better than others. They want to live in a world where those at the top tell those below what to do, and those below jump....