Talk:Marginalism/Archive 1

message: I don't find the distinction (that some previous author drew) between "neoclassical economics" and the "Austrian economists" to be as strong as suggested. I don't know much about Austrian economics, but the neoclassicals put a big emphasis on the subjective side of the supply of the "factors of production." 
Jdevine 15:43, 15 Jul 2004 (UTC)
thread_title:  Neoclassical v. Austrian 

message: I think there should be more attention payed to the supply-side of the market in this article. The way it is now it appears to claim that neoclassical economists try to explain the price of things by looking only at the demand where as they really view the supply-side is an equally important part of the story. 
Also it should be made clear that the pice being equal to marginal utility is not an assumption but something that follows from the assumption of individuals as rational and utility-maximising. This can be explained in simple non-mathematical terms, and is so done in any introductory textbokk in microeconomics, but i will leave the write-up of that explanation to someone more competent in English than I am. 
217.210.4.92 21:29, 1 August 2006 (UTC)
replies: text: Also it should be made clear that the pice being equal to marginal utility is not an assumption but something that follows from the assumption of individuals as rational and utility-maximising.
This quote illustrates that marginalism is circular. People want what they want.  This doesn't need mathematics, does it?!  In fact, it doesn't even need voicing!  And obviously the 'supply side' is important to price, but the admission of this leaves the door open to the hated LTV.  The problems with the article are nothing but the problems with marginalism itself and hence insoluble.--Jack Upland 05:15, 6 April 2007 (UTC)
thread_title:  Supply-side 

message: I consolidated Neoclassical_Revolution, Marginal utility, economic subjectivism, Marginal_theory_of_value and diamond-water paradox into marginalism, eliminating quite a bit of duplication and repetition.
The Marxist section could be more specific to marginalism, since endorsement of marginalism is not necessarily endorsement of capitalism. More informaiton in the Neoclassical section would be nice too.
DrThompson 04:12, 11 Mar 2005 (UTC)
thread_title:  Duplication 

message: I amended the statement that Marx distinguished between utility and use value (since these concepts are virtually identical) and said that Marx distinguished between exchange value and use value.
In general, there is a gulf between the labour theory of value and marginalism and there is no point muddying this as the article does.--Jack Upland 09:19, 1 December 2005 (UTC)
thread_title:  Marxist interpretation 

message: In the section on the Criticism of Marginalism the following has been added to the example of air being useful but free:
:"The standard response to such objections is to note that something that is both very useful and very abundant may have a trivial marginal value. Where air is no longer abundant, as on the upper slopes of Mount Everest, it isn't free either. Mountaineers pay for their supply of it in bottled form."
I added a note that the price of bottled air could also be explained by the labour involved. Other responses could include:
*Oxygen cylinders are a different "commodity" from atmospheric air and are sold at the same price at any altitude. (I doubt there's a shop on the top of Everest!).
*The sherpas don't use cylinders but they still breathe the rarefied air for free!
*Who on earth would they pay anyway???
*Many vitally useful items are cheap (water, staple foods etc). Many fairly useless items (ornaments etc) are expensive. Why refer to the concept of utility when it is so inapplicable?
I don't know if there is a Wikipedia policy on this, but responses and counter-responses could continue indefinitely. I think the criticism should stand alone to some degree.--Jack Upland 03:55, 3 January 2006 (UTC)
thread_title:  Criticism of Utility 

message: :However, this does not explain ...why large, easily extracted and easily found diamonds are worth much more than small, hard to extract ones.
This is a silly argument as any LTV would suppose a standardised value for a commodity (such as Marx's notion of "socially necessary labour") and not claim that the price of each item varied according to its individual origin. The comparison of diamonds and emeralds ignores the higher level of work involved in cutting diamonds and the monopolistic nature of their supply (LTV being based on an equilibrium of supply and demand).--Jack Upland 23:44, 13 January 2006 (UTC)
thread_title:  Cost of production 

message: I removed the link to the marginalrevolution.com blog. The last 10 entries were: 
*Hear Walt Whitman speak
*Why the War on Drugs is hard to win
*Bargaining in the Souk
*Scary sentence of the day
*Is American FDI more productive and am I dizzy?
*Bosnia and Herzegovina fact of the day
*Invisible hand podcasts
*Are neighborhood effects really family effects?
*Random thoughts from Marrakesh
*Why was British food so bad for so long?
Granted, they all touch on economics but none gives any insight into the meaning of marginalism. Therefore the link serves no purpose in this article.--Swift 20:41, 16 January 2006 (UTC)
thread_title:  External links 

message: I've been wondering, has there ever been an attempt to do a rigorous mathematical proof of the law of diminishing marginal utility.  Or does there exist one already?  It seems so natural and true for everything but at the same time, turning it into a purely mathematical proof would seem somewhat impossible given the way we define concepts like utility.  --Jordan Ledvina 20:28, 28 May 2006 (UTC)
thread_title:  Law of Diminishing Marginal Utility 

message: This section should be removed unless someone can explain how it is not simply a case of cost driven by supply.
The explanation in this section could do with some improvement:
:Water is essential, but after an easily acquired amount additional units have little to no value. 
This doesn't seem to make sense. Living in Australia during a drought, I find this 'easily acquired' tag a bit hard to take. (Incidentally, water though relatively scarce is not expensive.) Depending on how you interpret it, the sentence as a whole seems to be either circular ('you don't want more than you want') or plain wrong (additional units of water are not cheaper).
Then:
:Diamonds, however, as a very rare and sought after trade good, has value in as many additional units as one can find.
Describing diamonds as a 'sought after trade good' and using this to explain its economic value is circular. It amounts to saying diamonds as an expensive good are expensive.
Can someone who actually believes this perverse theory put Marginalism's answer in a logical fashion?--Jack Upland 01:17, 12 June 2006 (UTC)
replies: text: But once again, there seems to be a "smuggling in" of the concept that diamonds have more value: this is why we "would prefer to win a prize of a diamond". It avoids the question of why this is and what this "value" consists of. Hence it is still circular. (And it is basically a bizarre thought experiment, not a real-world explanation.)--Jack Upland 07:54, 17 June 2006 (UTC)

text: So at the end of the explanation, there's an acknowledgement this is no explanation?! Yet the classical economists did have a explanation - the labour theory of value...--Jack Upland 00:23, 18 June 2006 (UTC)
thread_title:  Diamond-water paradox 

message: Does it really make sense to have such a large marxism section? After all marxism is not a marginalist theory and its criticsim could be dealt with in the criticism section. 
But if one wants to have the section one should include replies to its criticisms. Eg, the second paragraph does not seam like a reasonable criticism. After all marginalists would agree that the process described in the paragraph takes place and that it wil drive prices down to average cost in the long run. This does not however mean that supply and demand does not operate. It just means that the longrun supply curve looks different from the shortrun supply curve.
The third paragraph is really meaningless. A physics analogy might clarify why. Imagine a ball hanging hanging in rope. It is affected by gravity and the force from the rope. In equilibrium these two forces will balance each other. One could claim just as well that they disappear and stop to act. Yet it is these forces that determine where the ball is since if it were higher or lower the forces would no longer balance and it would be pulled back towards equilibrium. Its the same in the market. The price is determined by the forces of supply and demand. The price will be set so that they are equal. If the price was at any other level than at equilibrium the excessive demand or supply would act to drive the price back to its initial level.
The circuliary charge should also be responded to. One might want to point to for example Scarfs algorithm where one can compute the price level in general equilibrium without entering any price level.
:On the physics analogy, the ball's equilibrium position would be determined by the rope's lenghth (or if it broke, by the position of the ground!)  Though this analogy is imperfect, it does illustrate the fallacy being put forward.  In practice, the fundamental things apply to the final analysis, and the transient impulses of supply and demand determine the temporary fluctuations.  If there is an algorithm that applies, then tell us what is it.  Say the supply is X and demand is Y - for a pencil or a palace! - what's the price???--Jack Upland 05:34, 6 April 2007 (UTC)
thread_title:  Marxism 

message: I think it is best if each marginal concept is explained as it is found by different schools. For example, the concept of marginal utility can be both based on ordinal and cardinal utility. It needs to be said which schools accept what. etc. Intangible 04:28, 15 October 2006 (UTC)
thread_title:  schools 

message: The article states:
"But prices as expressed in the marginal utility, assume that consumers have a given money income. Hence the initial distribution of income is implicit in the general pricing process. Thus while marginal utility theory makes prices appear as something independent of income-distribution, in fact it is dependent upon it. A different income distribution will produce a different price structure. As marginal utility theory cannot explain income distribution, neither can it explain prices."
Ok, first marginal utility does NOT assume that consumers have a given MONEY income. At most it assumes that consumers have some initial endowments of goods which they can trade. On the other hand, it is true that the resulting prices will generally be a function of the distribution of these endowments (unless you get crazy Austrian on this). And yes, a different distribution of endowments will lead to different price structures. However the last sentence does not follow logically from these (almost true) premises. First, the phrase "marginal utility theory cannot explain income distribution" doesn't really make sense (is someone thinking of marginal productivity theory here?). Second, and more substantially, even if marginal utility theory takes income/endowment distribution as given (i.e. does not explain it) that does not mean that it does not explain prices. In the end prices are functions of the underlying fundemental data of the economy; distributions of preferences and initial endowments. True, marginal utility doesn't have much to say as to where these initial endowments came from, but hey, you gotta start a model somewhere. So I'm removing the last sentence and changing 'money income' to 'endowments'.radek 21:24, 19 October 2006 (UTC)
replies: text: I removed that whole thing. It doesn't require any possessions whatsoever to trade. All one has to have is his own body or labor to trade. Marginal utility also applies to valuations of units of labor. I won't trade one hour of my labor for something unless that something has a higher marginal utility to me than one hour of labor washing my car. Anarcho-capitalism 02:20, 20 October 2006 (UTC)

text: Again, you don't have to have any possession to trade. If you have nothing material you trade your labor in order to get possessions. The theory of marginal utility still explains prices. By "prices" we're not necessarily talking dollar amounts. It applies to trade of anything. For example, the price of a drink of water may be one hour of labor.Anarcho-capitalism 00:58, 22 October 2006 (UTC)

text: The cost of an hour of labour is simply that alternative forgone inspite of it. The individual could have spent an hour working for an alcoholic drink. This is the cost of labouring an hour towards getting a water drink. Intangible 19:58, 22 October 2006 (UTC)

text: You're confusing cost with value. What determines the minimum value (the minimum price) of an hour of your labor is the marginal utility of whatever will be traded for it. I may offer you 2 glass of water for an hour of your labor and someone else may offer you 1 glass for an hour of your labor. The theory of marginal utility explains why we offer different prices (different amounts of water). Because I have more water than the other guy I am willing to offer you more for your labor than the other guy. Marginal utility determines why the price of your labor is two gallons of water when you trade with me and one gallon when you trade with someone else. If you have labor to sell and you want to buy water, do you care how much labor it took for us to acquire it and adjust the price of your labor accordingly? Of course not. Maybe it took none. Maybe I have a natural spring on my property and I'm selling water with virtually no labor on my part.Anarcho-capitalism 21:55, 22 October 2006 (UTC)

text: If you're thirsty and I am the only one with water because I have a natural fountain on my property, you will pay whatever price I ask for that water. You will work all day long just to get water from me. The price of your labor is determined not by my labor costs at all. I didn't manufacture the water, so there are no labor costs at all on my part. The minimum price of your labor is determined by the marginal utility of water. Since I have an unlimited supply I will accept any labor at all from you, but since there is no competition I will charge as much as I want. If there is competition, then for each provider of water, the prices will vary depending on each provider's marginal utility of water. Again, these providers do not manufacture water so the labor theory of value is totally inapplicable.Anarcho-capitalism 18:44, 23 October 2006 (UTC)
replies: text: Well, your assertion that the water takes no labor on your part is not entirely accurate, as you would have expended labor to obtain the property in the first place, and maybe had to dig the well, but once that is done, yes, there is no labor expended on your part. Dullfig 23:32, 23 October 2006 (UTC)
replies: text: I could have stolen the property or the state could have stolen it and given it to me.Anarcho-capitalism 02:29, 24 October 2006 (UTC)

text: Again, if I control a natural spring, I can still charge people to take water from it. I did not exert any labor, so obviously the price of water is not contingent on the amount of my labor. An important benefit of the marginal theory of value is that it works for manufactured as well as natural goods.Anarcho-capitalism 23:22, 24 October 2006 (UTC)

text: You're wrong that marginal utility theory doesn't recognize purcashing power. It totally acknowledges it. The less things I have to trade, the higher the marginal utiltity of these things. Therefore the more it's going to take to convince me to part with these things. I will only buy things that give me more utility than that which I'm trading away.Anarcho-capitalism 01:31, 25 October 2006 (UTC)
thread_title:  We'de done this before but maybe this time... =

message: The structure of this article seems to be illogical. The difference between schools should be made clear by each concept, instead of just at the end of the article. It makes a big (at least it did) difference if marginal utility is based on ordinal or cardinal utility for example. Intangible 16:29, 22 October 2006 (UTC)
thread_title:  structure 

message: I take exception to the marxist section: It is an extrapolation of what other people think marx would have said, had he been alive. I'm sorry, but that kind of writing does not belong in an encyclopedia. Under the critique section, one can list the critique of people that have actually analyzed the Marginal utility theory, and formulated a critique. But having an entire section go on and on about what marx might have said, based on his LTV, is baloney. -- Dullfig 02:49, 31 December 2006 (UTC)
replies: text: I think parts of this section belong in the Criticism section.--Jack Upland 05:24, 1 January 2007 (UTC)
replies: text: You might be right. Care to take a shot at it? Dullfig 20:22, 1 January 2007 (UTC)
thread_title:  Marxist critique