by Summary:
One of the many signs of the disconnect between Neoclassical economics and the real world is the theory of supply and demand, which has rising marginal cost meeting falling marginal revenue to determine both quantity and price. A century's worth of empirical research has shown that real-world firms have constant or falling marginal cost--not the rising marginal cost fantasy of textbooks--because, thank god, factories are designed by engineers rather than by economists.
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One of the many signs of the disconnect between Neoclassical economics and the real world is the theory of supply and demand, which has rising marginal cost meeting falling marginal revenue to determine both quantity and price. A century's worth of empirical research has shown that real-world firms have constant or falling marginal cost--not the rising marginal cost fantasy of textbooks--because, thank god, factories are designed by engineers rather than by economists.
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Steve Keen considers the following as important:
This could be interesting, too:
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| One of the many signs of the disconnect between Neoclassical economics and the real world is the theory of supply and demand, which has rising marginal cost meeting falling marginal revenue to determine both quantity and price. A century's worth of empirical research has shown that real-world firms have constant or falling marginal cost--not the rising marginal cost fantasy of textbooks--because, thank god, factories are designed by engineers rather than by economists. |
Without much research Neoclassical "rising unit cost theory" is already a suspect, because it contradicts Adam Smith's theory of division of labour (increasing labour productivity).
I guess the origin of this neoclassical theory is John Bates Clark who thought that Ricardo's "Law of Rent" is applicable to industrial capital, which it naturally is not (because division of labour increases productivity unlike falling land margin). But hey, we got at least beautiful graphics to play with even if it does not mean anything.
most interesting results from Binder study at 8 minutes on.
18 minutes strike me as logical in that most entrepreneurs have simple rules of thumb
2:30
This is a strawman. We see Supply and Demand in action on the stock and commodities markets every day. If more buyers show up, price increases.
If more sellers show up, price falls.
Are you thick bruv? Stocks need to be produced like commodities? Why ask these banal stupid questions? You think all manufactured goods are like potatoes and fish don't you?