RE: The ubiquity of flat marginal costs and the implications neo-classical micro are well-taken, but Eugene's cite of Delong/Summers I think does not follow.
Marginal costs for any particular bit of intellectual property are low and diminishing, but there is competition in the form of substitutes. If I am priced out of the market for the works of M. Perelman, I can turn to those of J. Devine. As far as I know, there is no monopoly or tendency thereto for any generic category of IP, except the leading software products. I'd say there are numerous fields where competition is lacking, but not especially for books, music, film, unless you just have to keep up with Eminem and Kid Rock will never do. The diminishing MC of IP is important in its own right, but monopoly is not necessarily the most important implication. On Thu, Sep 3, 2009 at 3:00 PM, Ann Davis(nib)<[email protected]> wrote: > Jim, > > Great example re: the incomplete bridge. > > It seems as though the typical assumption of continuously differentiable > production functions ignores the salience of partial (as in "incomplete") > products. If a product requires more than one period to complete, we need a > rate of time preference, the indeterminacy of which leads to my reference to > Harcourt. > > Thanks, > Ann > ----- Original Message ----- > From: "Jim Devine" <[email protected]> > To: "Progressive Economics" <[email protected]> > Sent: Thursday, September 3, 2009 9:44:12 AM GMT -05:00 US/Canada Eastern > Subject: Re: [Pen-l] Presumed "irrevelence of sunk costs" > > As I understand it, the reason why sunk cost is ignored is because > decision-making is supposed to be completely future oriented (you > can't make decisions to change the past). That doesn't mean that we > should ignore sunk cost as a possible indicator of the future, e.g., > sources of future profit. If you've almost finished building a bridge, > the doctrine of sunk costs tells us that we should ignore the costs we > paid to get the bridge 9/10 of the way across the river. But the fact > that you're almost there suggests that the return from finishing the > bridge would be high. > > I'm not sure that the issue of sunk costs has much to do with the > Cambridge controversy, which is more about issues of aggregation. > > On Thu, Sep 3, 2009 at 5:30 AM, Ann Davis<[email protected]> wrote: >> >> Beginning principles of micro one more time............the focus on marginal >> costs and marginal benefits, ignoring sunk costs, seems to make very clear >> how micro is simply ignoring the problem of capital. If capital investment >> can be interpreted as "sunk costs," it is "irrelevant." Mainstream >> economics has left this question entirely to "finance" and to accounting, it >> seems. >> >> Michael Perelman's recent piece on "an Idiosyncratic Road to Crisis Theory" >> also expands upon this issue, as well as Harcourt's book from 1972, >> "Cambridge Controversies in the Theory of Capital" (as well as Michael's >> other books). >> >> I add to my classes an alternative dynamic, within micro terminology, of the >> competition to lower AVC, by moving down the long term AC curve, in the >> increasing returns to scale section. But the investment decision is still >> very vague, and this process leads again to the zero profit equilibrium >> (which might be realistic within the context of perfect competition). >> >> How do others handle this frustration? Suggestions are most welcome. >> >> Ann >> >> >> _______________________________________________ >> pen-l mailing list >> [email protected] >> https://lists.csuchico.edu/mailman/listinfo/pen-l >> > > > > -- > Jim Devine / "laugh if you want to / really is kinda funny / cause the > world is a car / > and you're the crash test dummy" -- Devil Makes Three. > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
