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"Left wing kookiness"
vincent p. norris wrote:
Economics is a subset of psychology - psychology applied to matters of money, assets, liabilities, production, buying and selling, that sort of thing. That's not even in the ball park! Have you ever read an economics text? The closest economics comes to being "psychological" (and it's about as "close " as the North Pole is to the South Pole) is in making the assumption that people always behave "rationally." I.e., that entrepreneurs maximize profit by equating marginal cost with marginal revenue and that consumers "equate at the margin" so that the last penny spent on every good and service provides the same amount of "utility" (want-satisfaction). As many economists have long pointed out, those are safe assumptions. The theory that is derived from the assumptions accurately predicts how consumers and firms behave. All the conclusions of neo-classical price theory can be derived without introducing "utility" at all. A professor at UCLA named Armen Alchian, among others, showed that decades ago. That is, you don't need a three dimensional map, with goods X and Y on their respective axes, and utility on a Z axis; you can get downward sloping demand curves - the fundamental finding of price theory concerning demand - with only X and Y axes. What could be further form the truth than that? Consumers and firms behave "as if" they knowingly equate at the margins. |
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