The diminishing role of marginal utility in the Neoclassical theory of value

A complete and consistent theory of value is essential to any sound and credible system of economic thought. At the foundations, prices and value creation reflect back on the stability or otherwise of the economy, the smoothness of its exchanges, and the effectiveness of its signalling mechanisms. The marginalist revolution inaugurated a simple and precisely defined theory that negated discussion of issues such as these. Yet throughout its history, leading neoclassical figures have been divided over whether marginal utility determines prices. The main proposition put forth in this paper is that, as successive waves of neoclassical thought had corrected and modified the ideas of their predecessors, the role of marginal utility in determining prices diminished over time. This paper is structured along these three ‘waves’ of thought, beginning with Jevons’ declaration that value depends entirely upon utility, followed by Marshall’s supply-and-demand ‘scissors’ that, it is argued, diminished the role of marginal utility. The analysis concludes with the third wave of thought, which more or less abandoned marginal utility, but at the same time, accentuated marginalism.

In the history of neoclassical economics, the relationship between marginal utility and prices has never been fixed, but rather subject to continual revision and clarification. Three periods which stand out shall be defined here as falling under one of three ‘waves’: the first,  (1870-1874) associated with Jevons (2013 [1871]), Menger (2007 [1871]), and Walras (1954 [1874]), is marked by its vision of simplicity, employing analogies with the natural sciences; the ‘second wave’ (1881-1906), peaking with the publication of Marshall’s Principles of Economics (2013 [1890]), and associated with the works of Edgeworth (1881) and Pareto (2014 [1906]), is defined by its clarification of the crucial relationship between utility and demand, as well as prices and supply, reconciling bilateral exchange (or partial equilibrium) with multilateral exchange (or general equilibrium); and the ‘third wave’, dated between 1934-48, led by Allen and Hicks (1934), as well as Samuelson (1948), saw the introduction of formal axiomatic derivations of the theory of consumer choice, including ‘revealed preference’ and the theory of the marginal rate of substitution, all superseding marginal utility.

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Sextus Empiricus on scepticism triggered by variations in circumstances

One of the relatively neglected modes of scepticism—modes that lead one to conclude to suspension of judgement—arguably pertains to that of circumstances. Mostly this is because we are accustomed to such circumstances, or, when they strike us as important, are either so fleeting as to be unnoticed, or are typically viewed as anomalies to be compared with a commonly accepted standard, and so admit of irrelevance. The central task of Sextus Empiricus in enumerating the mode of scepticism pertaining to circumstances consists in the attempt to show that the different appearances which come about depending on different conditions will be undecidable. The goal of this paper is to evaluate whether Sextus has successfully carried out this task, through a close reading of his first book of the Outlines of Scepticism. The logical structure of his fourth mode is reviewed first, before its association with the infinite regress is assessed second. The contingency of circumstances on standards is analysed third.

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The individual vs the collective: Karl Marx and Daniel Bell on social class theory

A major preoccupation of political philosophers and social scientists has consisted in the divination of the origin, causes, and effects of inequalities between persons and groups of a nature that do not readily admit to differences in intelligence or ability—that is, inequalities based (primarily) on class and economic circumstances, or, as has been more recently understood, disability, ethnicity, gender identity, sexual orientation, age, religion, and creed. This blog examines the approaches of two such social scientists, Karl Marx and Daniel Bell, to this study of class. Their respective views concerning the origin of classes are first examined, before the two conceptual frameworks proffered for this understanding are compared. The implications for the individual and the collective are then assessed, with particular reference paid to the political economic transformations observed in mereological constitutions of class analysis. That is to say, transformations of class structures and mobility within these structures that are the result of interactions between parts, or individuals, and the whole, or the collective. Comparing the ideas of Marx with those of Bell shows that the distinction between complexity and simplicity comprises a fundamental point of departure in studies of class structure. This is the key conclusion of the analysis presented in this blog.

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Secular Stagnation: Low Inflation in a World of Monetary Stimulus

The Reserve Bank’s bulletin series returns in the September quarter of 2017 with a back-to-basics review of the transmission mechanism of monetary policy. In ‘The Transmission of Monetary Policy: How Does It Work?’, Tim Atkin and Gianni La Cava bifurcate the transmission mechanism into two stages, the first being a concentrated impact on interest rates, the second being the wide-ranging spill-over impacts on economic activity and inflation. Their core insight is that the housing market is responsible for propagating activity through the economy: it is where the transmission mechanism is at work. Atkin’s and La Cava’s analysis, however, would be improved if a consideration of the breakdown of the transmission mechanism was included in the light of what Larry Summers (2014) terms ‘secular stagnation’, a situation of high debt, low growth, low demand, low interest rates, and low inflation.

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Fordism, Post-Fordism and the plight of taxi drivers around the world

A collectivist society would never have adopted Fordism. So it is a curious thing that Fordism coincided with the ‘New Deal’, a period of unrivalled growth and low unemployment, generous government benefits, and strong labour union power, which taken together constituted — you guessed it — a collectivist society.

Alienation and the revolution of the automobile

Marx, and later the existentialist philosophers, theorised that workers became alienated from their works under capitalism because they were produced for others, and were instruments of profit and revenue for the sustenance of life in a commodity-exchange economy. It was with the advent of the Fordist production line that this alienation had taken on its most distinct and vivid character.

It begs the question: What was produced on those production lines? Were they really just cars?

They were nominally speaking replacements for the horse-and-cart. But Ford conjured up a very effective way of polluting the planet, from one combustion engine to the next, completely transforming the environment. Aside from the fact that a car takes you from point A to point B, they also revolutionised the world, introducing the modern conception of the city.

In this way it is not just a machine but the embodiment of an idea: the car is predicated on the assumption you would own a conveyance that could get only you from point A to point B, without ever asking anybody else for permission, or depend on a centralised public transport system, or a timetable that would sanction as much.

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Reconciling Christianity with Epicurean philosophy: A closer look at Gassendi’s attempt

This blog discusses the combination of Gassendi’s religious belief with his Epicureanism. It explores how his commitment to Epicurean philosophy is distorted as a result, before determining whether his overall view is consistent. The original title of this essay was ‘Whole Resolved Into Parts: Pierre Gassendi and the Reconciliation of Atomism and Christianity’. 

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Unknown artist; Pierre Gassendi (1592-1655); The Royal Society; http://www.artuk.org/artworks/pierre-gassendi-15921655-216339

Pierre Gassendi (1592-1655), 17th century French philosopher, priest, astronomer, mathematician, and scholar of ancient thought, is best known for his ‘Epicurean project’, an attempt to fuse Christian belief with Epicurean ideas. Through a close reading of chapter eight of the third book on Physics in his 1658 posthumous work The Syntagma Philosophicum, an attempt will be made to discern whether this enterprise of Gassendi’s is, on the whole, consistent. The main proposition is that, read historically, Gassendi’s synthesis is problematic, but approached through a mereological lens, it makes sense. Gassendi’s conception of atomism, and its attendant problems, are examined first. His reconciliation of parts (i.e. atoms) and the whole (i.e. universe) is assessed second. The problems of incorporeality and the void are analysed third. The paper concludes with an appraisal of Gassendi’s system overall.

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Structure and Agency in Marx’s Eighteenth Brumaire

This essay forms part of an assessment I completed for a prerequisite course on class in political economy, and is reproduced below. It should be noted I am in no way interested in Marx’s social theories, only his economic ones, so have imposed on The Eighteenth Brumaire my own interest in structure and agency, and have analysed it only to the extent it provides some insight on such themes germane to complex systems theory, the school of thought I identify with.

Karl Marx’s 1852 historical essay The Eighteenth Brumaire of Louis Bonaparte explores many issues in historical political economy. One of the more interesting aspects of the work is its treatment of structure and agency, particularly with regard to the question of which of the two drives change. At face value, Marx appears to argue the case for both: that is, that structure and agency both compel change, as when it is stated that ‘men make their own history, but not as they please’ (Tucker 1978: 595). This paper seeks to fill a gap in the literature by proffering an alternative view, namely, that it might be the case that sometimes neither structure nor agency compel change. The main proposition is that the divergence of political and economic interests drives this behaviour. The paper begins by revisiting Marx’s analysis of the events that led up to the coup d’état of 1851. This is followed by an evaluation of his argument that in the EB class interests diverge. The analysis concludes with a critical analysis of the dynamics of structure and agency in the light of their inversion.

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Theophrastus and the Theory of Spontaneous Generation

The Peripatetic theory of spontaneous generation is one of the foremost theories of the natural philosophy of classical antiquity. Having been accepted for two millennia, and only refuted as recently as the nineteenth century, it has proven to be a great legacy of Greek thought and its manifest reasoning. Its preeminence on the scientific stage has come to be as equally significant in the philosophical one, being embraced by materialist and idealist thinkers alike, as well as those on both sides of the theological-Darwinist divide. This paper seeks to examine how Theophrastus’ rehearsal of the theory of spontaneous generation illustrates the activities and philosophical orientation of the Peripetatic school. The paper first examines the historical context of the theory, before unpacking its theoretical and methodological background. The analysis concludes with an investigation of Theophrastus’ espousal of inductive reasoning.

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Intrapersonal Communication in the Division of Labour: An Allegory

The original title of this piece was: A Manifesto promulgated for the purposes of enumerating the Order and Evolution of Intrapersonal Communication in the determination of the Division of Labour.


In dedication to

DAVID JOSEPH BOHM

The psychological rule says that when an inner situation is not made conscious, it happens outside, as fate. That is to say, when the individual remains undivided and does not become conscious of his inner opposite, the world must perforce act out the conflict.

JUNG


ALL YE FORTHCOME—let us now appropriate Hilbert, and endeavour to wonder: oh, the division of labour! No other question has ever moved so profoundly the spirit of man; no other idea has so fruitfully stimulated his intellect; yet no other concept stands in greater need of clarification than that of the division of labour. It is nothing short of a miracle that the progress of society has become the certain if not involuntary concern of the individual. In contrast to primitive collective organisation, where each strives for his own self-sufficiency, his own preservation, today the individual strives for their own society’s self-sufficiency, their own society’s preservation. He distinguishes himself from others, breaking his association with the whole of nature, and the continuity that marks his soul. The individual has become merely the fragment of a structure, no longer instantiating the part of a whole. Continue reading “Intrapersonal Communication in the Division of Labour: An Allegory”

A Philosophinity analysis of: Tim Burton’s Charlie and the Chocolate Factory (2005)

This is a story of an ordinary little boy named Charlie Bucket. He was not faster or stronger or more clever than other children. His family was not rich or powerful or well-connected. In fact, they barely had enough to eat.

Tim Burton’s masterpiece Charlie and the Chocolate Factory (2005) is only a remake of Mel Stuart’s Willy Wonka & The Chocolate Factory (1971) in name only. The film is really an ingenious and wholly independent adaptation of Roald Dahl’s 1964 novel Charlie & The Chocolate Factory. In fact it is difficult to believe, watching Burton’s film, that the depressive auteur ever saw the original. If it the case that he did, it is still yet a miracle how he conjured a remake as original as the one that has prevailed.

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