Month: June 2021

Appendix L

§1. Ricardo claimed that expensive food harmed the nation far more than it benefitted the landlords profiting from higher food prices.  (This makes sense… read more about the Corn Laws and how their repeal in 1846 massively helped the poor.)

Ricardo then says that higher taxes on domestic grain (“corn”), in the special case of no imports and perfectly inelastic demand, will only result in higher prices to consumers. Relaxing these restrictions, higher taxes would result in producing shifting to other crops (“substitution”) and lower prices for producers (“incidence”), both of which illustrate the limits to the power of taxes as well as the dead weight losses (from changes in production) that taxes bring.

Finally, Ricardo claims that higher returns to capital will result in LESS investment in each area, as capital is removed for use elsewhere and local profits are maintained. This is slightly counter-intuitive, but not if you think of profit seeking being a more important goal than grain production.

Overall, Ricardo — Marshall claims — had deep and interesting insights into what would (today) be called general equilibrium theory.

/fin

This is where my year-and-a-half “review” of Marshall stops.  There’s one chapter left — the Mathematical Appendix — but I can’t be bothered to review, interpret (there are many novel symbols and expressions) and compare that Appendix to the current practice of (over) using mathematics in economics. I am sure that it has many interesting insights, but those are best left to others who are into the math.

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This post is the last penultimate in part of a series for the Marshall 2020 Project, i.e., an excuse for me to read Alfred Marshall’s Principles of Economics (1890 first edition/1920 eighth edition), which dominated economic thinking until Van Neumann and Morgenstern’s Theory of Games and Economic Behaviour (1944) and Samuelson’s Foundations of Economic Analysis (1946) pivoted economics from institutional induction to mathematical deduction.

Appendix K

§1. This chapter is not very interesting. Marshall merely notes that surplus from infra marginal activities (work, production and consumption) accrues to workers, capitalists and consumers, respectively, before falling to zero “at the margin.”

He warns against double-counting the surplus of a consumer from Product A against the surplus to that consumer (as worker on Service B) or to the capitalist in the process of producing A.

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This post is part of a series in the Marshall 2020 Project, i.e., an excuse for me to read Alfred Marshall’s Principles of Economics (1890 first edition/1920 eighth edition), which dominated economic thinking until Van Neumann and Morgenstern’s Theory of Games and Economic Behaviour (1944) and Samuelson’s Foundations of Economic Analysis (1946) pivoted economics from institutional induction to mathematical deduction.

Appendix J

§1. This appendix covers a strange (and now forgotten?) debate over capital and labor. Although capital complements labor, some economists seemed to think that the “wages fund” (money available for wages) is limited by the amount of capital. This makes no sense to me in aggregate but it can matter in particular circumstances.

§2. In aggregate, wages depend on the balance of supply and demand (e.g., population versus economic activity), always mediated by relative market power.

§3. There is a connection between the markets for commodities and the markets for the capital and labor inputs to those commodities, but those connections are weaker or stronger depending on a number of factors (time, trade, substitutes, etc.). Many economists have wasted their time trying to identify the connection (e.g., Marx with labor theory of value).

§4. When is comes to divvying up the “national surplus” among various factors of production, relations are neither simple nor stable. There are many elements to consider.

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This post is part of a series in the Marshall 2020 Project, i.e., an excuse for me to read Alfred Marshall’s Principles of Economics (1890 first edition/1920 eighth edition), which dominated economic thinking until Van Neumann and Morgenstern’s Theory of Games and Economic Behaviour (1944) and Samuelson’s Foundations of Economic Analysis (1946) pivoted economics from institutional induction to mathematical deduction.

Appendix I

§1. Ricardo didn’t spell out all his assumptions, connect his theories with the real world, or bring logical vigor to his 1820 Principles of Political-Economy, which has led to — according to Marshall — unfair critiques that focussed on his inconsistencies rather than his larger ideas.

§2. Marshall gives many examples of where Ricardo’s partial or over-simplified statements led to confusion. The most significant misunderstanding was where Marx, using Ricardo’s own words, concluded that Ricardo thought that value arose only through labor inputs whereas Ricardo considered other inputs’ influences in other parts of his work.

§3. Marshall spends a few pages documenting arguments about the relations between production cost (supply), utility value (demand) and price, which reconciles the two in the same way as each blade of scissors (Marshall’s analogy) jointly produce a cut.

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This post is part of a series in the Marshall 2020 Project, i.e., an excuse for me to read Alfred Marshall’s Principles of Economics (1890 first edition/1920 eighth edition), which dominated economic thinking until Van Neumann and Morgenstern’s Theory of Games and Economic Behaviour (1944) and Samuelson’s Foundations of Economic Analysis (1946) pivoted economics from institutional induction to mathematical deduction.