<*>Is this something you cooked up or something you picked up from reading the late Julian Simon?<*>
By "new" I meant in respect to the nineteenth century derivation of the marginalist orthodoxy. It goes back more than eighty years, to the time of Veblen and Major Douglas. In the 1920s it was called the "new economics," a term adopted by Keynesians in the 1930s. As to Julian Simon, I had not even heard the name until a few weeks ago, when Keith Wilde pointed him out to me. I wish I had caught on to him earlier. I am more influenced by Paul Davidson, who has informed us that the world has never run out of a "non-renewable" resource like oil, but has exhausted "renewable" resources many times. In the Middle Ages Europe twice ran out of wood. -- <*>Very simply, in the short run many resources are limited. It takes time to drill new oil wells or increase output rates from old ones. It takes time to dig new coal mines or other mines.<*> Time is indeed a limiting resource in the short run. Not the quantity of obtainable oil, wells for drilling, or rates of output in the long run. Time is however abstracted from the marginalist equation: "Once the equilibrium has been established in principle, exchange can take place immediately. Production, however, requires a certain lapse of time. We shall resolve the second difficulty purely and simply by ignoring the time element at this point." (Léon Walras, Elements of Pure Economics) -- <*>It becomes less so in the long run, although even there, it is false that resources are "unlimited,"<*> Who said "unlimited"? The marginalist concept of "scarcity" does not mean "zero," and the anti- marginalist concept "abundancy" does not mean "infinite." The difference is between the "micro" perspective of the individual firm, and the "macro" perspective. The individual firm, in terms of achieving its objectives, to the extent it is not a monopoly, is a small fish in the pond. That small fish certainly does perceive resource or budgetary constraints in terms of profitability. But the perception changes when we look at the situation from the perspective of the pond as a whole, through time and generations. The biggest problem with marginalism is that it falsely assumes converging functions for the economy as a whole in the long run, like the terminal velocity of a falling object, where drag is proportional to the square of the object's velocity, so as the object accelerates toward the ground the drag opposing the gravitational constant is increasing to the point where the drag and gravitational force on the object become equal. But if drag is actually decreasing or is constant, rather than increasing, there is no terminal velocity. And if returns are increasing or are constant, rather than decreasing, there is no intersection between supply and demand, and therefore no "equilibrium." We can have all that we want, given of course enough time. Looking at it this way, "what is physically possible is financially possible," the old social crediter slogan. There are no real constraints to what we can achieve. It is the difference between optimism and the pessimism embedded in marginalism, when applied to the economy as a whole. But even when applied to the individual firm, it is in poor substitution for double entry accounting. So it becomes less than useless heuristically. Businessmen simply don't think that way. And it is impossible for students. So those who can comprehend the impossible remain economics majors, while the less comprehending transfer to other fields. In the process the general IQ of the profession degrades. --------- Original Message --------- DATE: Tue, 28 Oct 2003 11:16:45 From: "Barkley Rosser" <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]>, <[EMAIL PROTECTED]> Cc: > "The new approach to economics"??? Is >this something you cooked up or something you >picked up from reading the late Julian Simon? >Very simply, in the short run many resources are >limited. It takes time to drill new oil wells or increase >output rates from old ones. It takes time to dig new >coal mines or other mines. So, marginalism is >certainly relevant in the short run. > It becomes less so in the long run, although >even there, it is false that resources are "unlimited," >although many that may be constrained in the short >run are not very constrained in the longer run. Ironically >those that are really in the shortest supply are not the >non-renewable ones, but the so-called renewable ones. >Once you have driven a species to extinction it is gone >forever. Unlike methane, we will not find it on Jupiter. >Barkley Rosser ____________________________________________________________ Enter for a chance to win one year's supply of allergy relief! http://ad.doubleclick.net/clk;6413623;3807821;f?http://mocda3.com/1/c/563632/125699/307982/307982 This offer applies to U.S. Residents Only --^---------------------------------------------------------------- This email was sent to: [EMAIL PROTECTED] EASY UNSUBSCRIBE click here: http://topica.com/u/?a84IaC.bcVIgP.YXJjaGl2 Or send an email to: [EMAIL PROTECTED] TOPICA - Start your own email discussion group. FREE! http://www.topica.com/partner/tag02/create/index2.html --^----------------------------------------------------------------
