About economist
Robert Vienneau
> 1. What is value? Is value created by nature? How can we know the value
> exist?
Neoclassical economists thought there value theory was related to
nature. Equilibrium prices are supposed to be indices of relative scarcity.
Resources are supposed given in nature. Neoclassical economics is
often taken to be a general logic not dependent on any particular
set of social institutions such as those that exist under capitalism.
> 2. Do we have any theory of value which can explain it correctly and
> logically?
Mainstream economists do not have a correct and logical theory of value.
The following critiques (in reverse chronological order) show Neoclassical
economics to be incoherent and insufficiently general:
o Philp Mirowski's demonstration that Neoclassical economics relies on
an arbitrary and theoretically and empirically unjustified conservation
law.
o The Sonnenschein-Mantel-Debreu demonstration that one cannot depend
on equilibria in General Equilibrium Theory being either unique or
stable.
o The Cambridge Capital Controversy argument that factor prices are not
determined by supply and demand in factor markets and that there is
no coherent Neoclassical theory of production.
o Sraffa's demonstration in the 1920s that Marshallian partial
equilibrium is valid only if non constant returns are external to
the firm and internal to the industry, the situation least likely
to be encountered in practice.
> 3. Do we have a value theory of economics which can explain how the
> value exist etc. correctly?
Promising approaches to the theory of value can be found in the Classical
and Marxist emphases on reproducability and surplus, in Keynes' Chapter 17
liquidity preference theory of value, in Kalecki's markup theories of
pricing, and in American Institutionalism. Partisans of mainstream
economics might hope that the Santa Fe Institute's increasing returns
theory of economics or Game Theory might someday be developed into an
acceptable theory of value.
[Questions deleted on which I do not feel like offering an opinion]
> 12. There are no students, professors or professional economists have
> complained of such textbooks of economics openly, why? Is there a secret
> and powerful organization to control them?
One might argue mainstream economics is vulgar bourgeois apologetics for
capitalism. At any rate, mainstream North American economists are encouraged
to be ignorant about some logical consequences of maximizing behavior and
about the literature of their subject, especially history of thought.
--
Robert Vienneau Try my Mac econ simulation
removethis!rv...@future.dreamscape.com game, Bukharin, at
ftp://csf.colorado.edu/econ/authors/Vienneau.Robert/Bukharin.sea
Whether strength of body or of mind, or wisdom, or virtue, are always
found...in proportion to the power or wealth of a man [is] a question
fit perhaps to be discussed by slaves in the hearing of their
masters, but highly unbecoming to reasonable and free men in search
of the truth. -- Rousseau
Markus Diehl
Robert Vienneau wrote:
>
> Promising approaches to the theory of value can be found in the Classical
> and Marxist emphases on reproducability and surplus, in Keynes' Chapter 17
> liquidity preference theory of value, in Kalecki's markup theories of
> pricing, and in American Institutionalism. Partisans of mainstream
> economics might hope that the Santa Fe Institute's increasing returns
> theory of economics or Game Theory might someday be developed into an
> acceptable theory of value.
Hi Robert,
can you proof, that any of these theories do escape the inconsistencies you
brought up against neoclassical (or general equilibrium) value theory? And
which of these theories can be made operational in measurable variables?
My impression is: these theories somehow escape quantitative comparisons.
CU, Markus
--
Markus Diehl (Diplom-Volkswirt)
Institute of World Economics
Development Economics Department
P.O.Box 4309, 24100 Kiel, Germany.
Charles Stewart
Robert Vienneau <removethis!rv...@dreamscape.com> wrote:
>Mainstream economists do not have a correct and logical theory of value.
>The following critiques (in reverse chronological order) show Neoclassical
>economics to be incoherent and insufficiently general:
> o Philp Mirowski's demonstration that Neoclassical economics relies on
> an arbitrary and theoretically and empirically unjustified conservation
> law.
Would it be possible to give a brief outline of this argument?
Charles
Markku Stenborg
On 11 Aug 1997 12:58:16 GMT, worc...@sable.ox.ac.uk (Charles Stewart)
wrote:
It's been a decade or so since I read Mirowsky, but this is the
impression engraved in my cheesy memory. As far as I recall, Mirowski
did demonstrate nada, other than the math used in econ was originally
developed for probs in classical physics. His argument was something
like this. Preferences on commodity space look like a vector field
just like the one caused by magnetism or by gravitation. If we
interpret the econ preference maximation and trading of goods in
physics terms, the econ characterization looks like something
physicists do not believe in.
_________
Markku Stenborg
OFC & Turku Business School
ROT13ed for the hell of it:
znexxh....@svabsp.sv [My apologies to Mr Znexxh Fgraobet of
zne...@hgh.sv [Svabsp, Slovenia, for any spam received.]
Robert Vienneau
Here's an outline of the mathematics and economic theory of Mirowski's
critique of Neoclassical economic theory. I assume some typographic
generosity on the part of my readers.
Consider a pure exchange economy. For ease of exposition, assume income
effects are negligible. Likewise, assume only three goods exist, X, Y,
and Z.
The goods X, Y, and Z define a 3-D space of quantities of each good.
The utility function U( x, y, z ) assigns a real number to any point
in that space. The utility function is a potential function, much
like gravitational potential energy.
A force field is associated with utility. There is a 3-element force
vector defined at each point in the field:
( Px, Py, Pz ) = grad U = ( dU/dx, dU/dy, dU/dz )
Prices are forces constituting a conservative force field.
Work (change in kinetic energy) is defined as a line integral over
the forces:
T1 - T2 = int P ds
Since prices are constant, work is merely expenditure or change in
income:
T1 - T2 = x Px + y Py + z Pz
In Newtonian mechanics, the sum of potential and kinetic energy
is constant. Just so, the sum of utility and income is conserved in
neoclassical economics. Don't ask economists why; they have no answer.
Another way of expressing that prices form a conservative force field
with utility as the potential function is stating that the work
performed around any closed curve is zero:
int P ds = 0
I interpret this to mean that people don't learn about or change their
tastes in moving about the commodity space. Pareto was vaguely aware
of this interpretation and wrote about it.
For a force field to be conservative, it's curl must be zero. Recall
that the curl of a vector function P is defined as follows:
i j k
curl P = det d/dx d/dy d/dz
Px Py Pz
where i, j, and k are the unit vectors.
curl P = ( dPz/dy - dPy/dz, dPx/dz - dPz/dx, dPy/dx - dPx/dy )
So for prices to be a conservative force field in commodity space,
the following must hold:
curl P = 0
Or
( dPz/dy - dPy/dz, dPx/dz - dPz/dx, dPy/dx - dPx/dy ) = 0
That is, the following Jacobian matrix is symmetric:
dPx/dx dPy/dx dPz/dx
JP = dPx/dy dPy/dy dPz/dy
dPx/dz dPy/dz dPz/dz
This means the inverse of this Jacobian matrix would also be symmetric.
That is, the (Walrasian) demand functions are symmetric. But, ignoring
income effects, this is merely a statement of the Slutsky conditions,
or equivalent to the strong axiom of revealed preference.
How can one account for income effects? D. Wade Hands answered this
question years ago. Mirowski's discussion in _More Heat than
Light_ of "generalized commodity coordinates" and Lagrangians showed
him to aware of these issues. The Slutsky conditions are
equivalent to the symmetry of compensated demand functions. Define
"compensated prices" to be those prices that appear in the inverse
of the matrix of compensated demand functions. Neoclassical theory
assumes that compensated prices form a conservative vector field.
After more than a century of mathematics, most neoclassical economists
have no idea what they are assuming.
Imagine a child, perhaps "Dennis the Menace," who has blocks which
are absolutely indestructible, and cannot be divided into pieces. Each
is the same as the other. Let us suppose that he has 28 blocks. His
mother puts him with his 28 blocks into a room at the beginning of the
day. At the end of the day, being curious, she counts the blocks very
carefully, and discovers a phenomenal law - no matter what he does
with the blocks, there are always 28 remaining! This continues for a
number of days, until one day there are only 27 blocks, but a little
investigating shows that there is one under the rug - she must look
everywhere to be sure that the number of blocks has not changed. One
day, however, the number appears to change - there are only 26 blocks.
Careful investigation indicates that the window was open, and upon
looking outside, the other two blocks are found. Another day, careful
count indicates that there are 30 blocks! This causes considerable
consternation, until it is realized that Bruce came to visit, bringing
his blocks with him, and he left a few at Dennis' house. After she has
disposed of the extra blocks, she closes the window, does not let
Bruce in, and then everything is going along all right, until one time
she counts and finds only 25 blocks. However, there is a box in the
room, a toy box, and the mother goes to open the toy box, but the
boy says "No, do not open my toy box," and screams. Mother is not
allowed to open the toy box. Being extremely curious, and somewhat
ingenious, she invents a scheme! She knows that a block weighs three
ounces, so she weighs the box at a time when she sees 28 boxes, and it
weighs 16 ounces. The next time she wishes to check, she weighs the
box again, subtracts sixteen ounces and divides by three. She discovers
the following:
number of weight of box - 16 ounces
blocks seen + ------------------------- = constant
3 ounces
There then appear to be some new deviations, but careful study indicates
that the dirty water in the bathtub is changing its level. The child is
throwing blocks into the water, and she cannot see them because it is so
dirty, but she can find out how many blocks are in the water by adding
another term to the formula. Since the original height of the water
was 6 inches and each block raises the water a quarter of an inch, this
new formula would be:
number of weight of box - 16 ounces
blocks seen + -------------------------
3 ounces
height of water - 6 inches
+ -------------------------- = constant
1/4 inch
In the gradual increase in the complexity of her world, she finds a whole
series of terms representing ways of calculating how many blocks are in
places where she is not allowed to look. As a result, she finds a complex
formula, a quantity which *has to be computed*, which always stays the
the same in her situation.
What is the analogy of this to the conservation of energy? The most
remarkable aspect that must be abstracted from this picture is that
*there are no blocks*...
-- Richard Feynman
What, then, is truth? A mobile army of metaphors, metonyms and
anthropomorphisms - in short, as sum of human relations, which have
been enhanced, transposed, and embellished poetically and rhetorically,
and which after long use seem firm, canonical, and obligatory to a
people: truths are illusions about which one has forgotten that is
what they are; metaphors which are worn out and without sensuous power;
coins which have lost their pictures and now matter only as metal, no
longer as coins.
-- Friedrich Nietzsche
Markku Stenborg
On 12 Aug 1997 22:03:39 GMT, removethis!rv...@dreamscape.com (Robert
Vienneau) wrote:
[snip]
> In Newtonian mechanics, the sum of potential and kinetic energy
> is constant. Just so, the sum of utility and income is conserved in
> neoclassical economics. Don't ask economists why; they have no answer.
This economists knows that the claim is not true -- or, at least,
inadequately expressed. The utility functions are arbitrary up to
monotonic transformations. If U is the utility function representing
some preferences, V = f(U), f' > 0, also represents exactly the same
preferences. Sum of U + Y is rarely equivalent to the sum f(U) + Y,
where Y is the income, so the statement concerning these sums is
confused, at min.
[snip]
> This means the inverse of this Jacobian matrix would also be symmetric.
> That is, the (Walrasian) demand functions are symmetric. But, ignoring
> income effects, this is merely a statement of the Slutsky conditions,
> or equivalent to the strong axiom of revealed preference.
>
> How can one account for income effects? D. Wade Hands answered this
> question years ago. Mirowski's discussion in _More Heat than
> Light_ of "generalized commodity coordinates" and Lagrangians showed
> him to aware of these issues. The Slutsky conditions are
> equivalent to the symmetry of compensated demand functions. Define
> "compensated prices" to be those prices that appear in the inverse
> of the matrix of compensated demand functions. Neoclassical theory
> assumes that compensated prices form a conservative vector field.
>
> After more than a century of mathematics, most neoclassical economists
> have no idea what they are assuming.
As I recall, the symmetry follows from the Young's Theorem, so there's
nothing mysterious going on.
I never understood what was so amusing about the similarities between
the math used in Physics and in Econ. The rules of algebra and
analysis are the same for both fields, I'd assume, and some of the
math used by Econ was originally develop for some questions in
Physics. The difference is in what the symbols represent, so logically
possible ways of manipulating equations could be meaningless.
Wouldn't it be equally silly if economists started to whine that
physicists forget the game-theoretic strategic effects in their
calculations?
[snip]
_________
Markku Stenborg
OFC & Turku Business School
ROT13ed for the hell of it:
zne...@hgh.sv [My apologies to Mr Znexxh Fgraobet of
znexxh....@svabsp.sv [Svabsp, Slovenia, for any spam received.]
Markus Diehl
Robert Vienneau wrote:
>
> In Newtonian mechanics, the sum of potential and kinetic energy
> is constant. Just so, the sum of utility and income is conserved in
> neoclassical economics. Don't ask economists why; they have no answer.
>
I think Markku has already sent his fundamental critique against
Mirowski's approach. (BTW: my impression is that Mirowski's rethoric
capacity is much bigger than his economic one).
But let me take this last point. Did you ever ask an economist to
translate the energy conservation law into the hypotetical economic law?
I'll try: the physical law postulates e.g. that a falling mass - starting
from a point with high potential energy - has increasing kinetic energy
while its potential energy shrinks. In microeconomic demand theory a
household - starting from a point with unspent income - increases its
utility while the unspent money shrinks. The only question is how to add
utility and money, but if you add the marginal utility of consumption
expenditure into your equations (which you apparently forgot) there
is a meaningful "conservation law" also in economics.
> After more than a century of mathematics, most neoclassical economists
> have no idea what they are assuming.
>
Discuss that with P.A.Samuelson. Remember the quote on the first page of
his "Foundations"? And please don't forget to tell us what his reply was.
CU, Markus
--
Markus Diehl
Robert Vienneau
In article <33f24670...@news.eunet.fi>, real.a...@bottom.of.msg
(Markku Stenborg) wrote:
> On 12 Aug 1997 22:03:39 GMT, removethis!rv...@dreamscape.com (Robert
> Vienneau) wrote:
>
> [snip]
>
> > In Newtonian mechanics, the sum of potential and kinetic energy
> > is constant. Just so, the sum of utility and income is conserved in
> > neoclassical economics. Don't ask economists why; they have no answer.
>
> This economists knows that the claim is not true -- or, at least,
> inadequately expressed. The utility functions are arbitrary up to
> monotonic transformations. If U is the utility function representing
> some preferences, V = f(U), f' > 0, also represents exactly the same
> preferences. Sum of U + Y is rarely equivalent to the sum f(U) + Y,
> where Y is the income, so the statement concerning these sums is
> confused, at min.
This objection is confused. Is it meaningless to compare how warm it is
in some cities in the U.S. and in Finland because we measure the
temperature in Fahrenheit in the U.S. and they use Centigrade in
Finland? Similarly, when physicists say that the distance between
two events is invariant between reference frames, they don't mean
that it is numerically equal when distances are measured in both
meters and feet.
One might object that for the sum of utility and income to be
meaningful, both arguments of this sum must be measured in the
same units and along the same measurement scale. Since income is
measured in dollars (or some other monetary units), presumably
utility must be, too. And therefore utility attains a ratio
measurement scale level. But economists only assume utility
attains at most an ordinal level.
Mirowski's work might lead one to question whether neoclassical
theory can truly get along with utility only being ordinal. But
the arguments for utility being ordinal are reasonable. So if
Neoclassical theory requires utility to be measured along a
ratio scale, and utility can only be assumed to be ordinal,
then Neoclassical theory needs to be revised or rejected.
[deleted]
> > How can one account for income effects? D. Wade Hands answered this
> > question years ago. Mirowski's discussion in _More Heat than
> > Light_ of "generalized commodity coordinates" and Lagrangians showed
> > him to aware of these issues. The Slutsky conditions are
> > equivalent to the symmetry of compensated demand functions. Define
> > "compensated prices" to be those prices that appear in the inverse
> > of the matrix of compensated demand functions. Neoclassical theory
> > assumes that compensated prices form a conservative vector field.
>
> [deleted]
>
> As I recall, the symmetry follows from the Young's Theorem, so there's
> nothing mysterious going on.
The symmetry implies that there exists a conservative vector field
in some space. Why haven't Neoclassical economists discussed this
implication of their theory? Is one supposed to reject some of
the logical consequences of one's assumptions while still asserting
the truth of the theory defined by those assumptions?
> [...] and some of the
> math used by Econ was originally develop for some questions in
> Physics.
That is a tremendous understatement. Neoclassical economists
appropriated an entire logical structure from 19th century
(pre-thermodynamics) physics.
> The difference is in what the symbols represent, so logically
> possible ways of manipulating equations could be meaningless.
Huh?
Markus Diehl
Hi Robert,
Robert Vienneau wrote:
>
> Why is this process of trading income for utility path-independent?
>
The process is path-indepent if the consumer preferences can be described
by a twice continuously differentiable utility function (on this and
related issues cf. Akira Takayama in Journal of Institutional and
Theoretical Economics, Vol. 140, 1984). And I have no reason to believe
that this is not a good approximation.
> > The only question is how to add
> > utility and money, but if you add the marginal utility of consumption
> > expenditure into your equations (which you apparently forgot) there
> > is a meaningful "conservation law" also in economics.
>
> Please expand.
Remember microenomics classes? The marginal utility of consumption
expenditure (the Lagrangian multiplicator) is necessary to transform
utility into monetary variables.
Christopher Auld
Robert Vienneau <removethis!rv...@dreamscape.com> wrote:
> "The addition of income and utility? The very concept seems absurd.
> Surely Fisher thought it so. It is probable that Fisher thought he
> could safely discard this aspect of the metaphor without harm to the
> rest of his system....
> -- Philip Mirowski, _More Heat than Light_ (1989)
"But Fisher never said that income and utility could be added
together, that metaphor was fabricated by Mirowski. Everyone
agrees that it makes no sense, but that's a problem for Philip
Mirowski, not for Irving Fisher."
-- from Hal Varian's review, _J Ec Lit_ June 1991.
>Why is this process of trading income for utility path-independent?
Because that is what is implied by either SARP or, equivalently, the
conditions on preferences required for a utility function to exist.
On another level, the question is meaningless. We want to model
what choice will be made given a budget set (there is never a
"process of trading income for utility," there is only a feasible
choice). If choices are inconsistent, we will not be able to make
predictions about how the agent will react to changes in the economic
environment, so pressing on with such a theory is futile. But if
choices are consistent (in the sense that they are well-ordered enough
so as to be represented by a utility function) then we also have
path independence.
--
Chris Auld au...@acs.ucalgary.ca
Economics, University of Calgary (403)220-4098
Calgary, Alberta, Canada <URL:http://jerry.ss.ucalgary.ca>
PGP public key: <URL:http://jerry.ss.ucalgary.ca/auld.asc>
Markku Stenborg
On 15 Aug 1997 03:13:32 GMT, removethis!rv...@dreamscape.com (Robert
Vienneau) wrote:
> In article <33f24670...@news.eunet.fi>, real.a...@bottom.of.msg
> (Markku Stenborg) wrote:
[snip]
> This objection is confused. Is it meaningless to compare how warm it is
Is not. Utility is an ordinal concept. Utility function U a concept
derived from preferences and is defined as follows. Decision maker i's
preferences over the states of the world are denoted by >i. A >i B is
read as "i prefers A over B", A >=i B as "i does not prefer B over A"
or "i weakly prefers A over B", and =i as "i is indifferent over A and
B". Now *if* there exists a function U st
U(A) > U(B) <=> A >i B,
U(A) >= U(B) <=> A >=i B, and
U(A) = U(B) <=> A =i B,
the U represents the same preferences as >i. The numerical value of U
is totally irrelevant other than in ordinal sense.
> in some cities in the U.S. and in Finland because we measure the
> temperature in Fahrenheit in the U.S. and they use Centigrade in
> Finland? Similarly, when physicists say that the distance between
> two events is invariant between reference frames, they don't mean
> that it is numerically equal when distances are measured in both
> meters and feet.
I didn't expect they did.
> One might object that for the sum of utility and income to be
> meaningful, both arguments of this sum must be measured in the
> same units and along the same measurement scale. Since income is
> measured in dollars (or some other monetary units), presumably
> utility must be, too. And therefore utility attains a ratio
No. Utility need not be measured in $s; utility is an ordinal concept
unlike $ which is cardinal. That is, it is meaningfull to say $10 - $8
= $2 but it is (usually) meaningless to say U(A) - U(B) = U(C).
> measurement scale level. But economists only assume utility
> attains at most an ordinal level.
>
> Mirowski's work might lead one to question whether neoclassical
> theory can truly get along with utility only being ordinal. But
Yes it can get along just fine, since utility is just a short-hand
notation for a more fundamental concept of preferences. You need
another angle to reject or to critizice neo- and neo-neo-classical
econ.
> the arguments for utility being ordinal are reasonable. So if
> Neoclassical theory requires utility to be measured along a
> ratio scale, and utility can only be assumed to be ordinal,
> then Neoclassical theory needs to be revised or rejected.
No. See above.
[snip]
> The symmetry implies that there exists a conservative vector field
> in some space. Why haven't Neoclassical economists discussed this
> implication of their theory? Is one supposed to reject some of
Because it seems irrelevant, nothing economically or socially
interesting seems to come out of it.
> the logical consequences of one's assumptions while still asserting
> the truth of the theory defined by those assumptions?
No. It is logically possibly to discuss the exact address of Santa
Clauss or the volume of his hair, while this discussion is irrelevant
(in many contexts).
> > [...] and some of the
> > math used by Econ was originally develop for some questions in
> > Physics.
>
> That is a tremendous understatement. Neoclassical economists
> appropriated an entire logical structure from 19th century
> (pre-thermodynamics) physics.
But Physics didn't use Game Theory.
> > The difference is in what the symbols represent, so logically
> > possible ways of manipulating equations could be meaningless.
>
> Huh?
For instance, there would be nothing illogical in solving the Nash
equilibrium of the game defined by the systems of equations in some
field of Physics, but the equilibrium and the discussion of its
properties would be meaningless.
Robert Vienneau
In article <33F1FA...@ifw.uni-kiel.de>, Markus Diehl
<M.D...@ifw.uni-kiel.de> wrote:
> Robert Vienneau wrote:
> >
> > In Newtonian mechanics, the sum of potential and kinetic energy
> > is constant. Just so, the sum of utility and income is conserved in
> > neoclassical economics. Don't ask economists why; they have no answer.
> >
>
> I think Markku has already sent his fundamental critique against
> Mirowski's approach.
"Is not" is not a critique. If you want an "is" in reply -
"The addition of income and utility? The very concept seems absurd.
Surely Fisher thought it so. It is probable that Fisher thought he
could safely discard this aspect of the metaphor without harm to the
rest of his system and replace it with his notion of human labor as
disutility, the cost by means of which income is generated. However
attractive his solution, Fisher was mistaken, and so, too, are the
great majority of neoclassical economists who follow in his
footsteps. This suppressed conservation principle, forgetting the
conservation of energy while simultaneously appealing to the
metaphor of energy is the Achilles heel of all neoclassical
economic theory, the point at which the physical analogy breaks
down irreparably."
-- Philip Mirowski, _More Heat than Light_ (1989)
> (BTW: my impression is that Mirowski's rethoric
> capacity is much bigger than his economic one).
Mirowski is certainly fun to read.
> But let me take this last point. Did you ever ask an economist to
> translate the energy conservation law into the hypotetical economic law?
> I'll try: the physical law postulates e.g. that a falling mass - starting
> from a point with high potential energy - has increasing kinetic energy
> while its potential energy shrinks. In microeconomic demand theory a
> household - starting from a point with unspent income - increases its
> utility while the unspent money shrinks.
Why is this process of trading income for utility path-independent?
> The only question is how to add
> utility and money, but if you add the marginal utility of consumption
> expenditure into your equations (which you apparently forgot) there
> is a meaningful "conservation law" also in economics.
Please expand.
--
Robert Vienneau
Markus Diehl wrote:
> Robert Vienneau wrote:
> >
> > Why is this process of trading income for utility path-independent?
> >
>
> The process is path-indepent if the consumer preferences can be described
> by a twice continuously differentiable utility function (on this and
> related issues cf. Akira Takayama in Journal of Institutional and
> Theoretical Economics, Vol. 140, 1984).
Markus,
Do you the agree the question of whether or not the second derivative
of an utility function exists is only meaningful if utility attains
at least an interval measurement-scale level? That is, the canonical
neoclassical model does indeed assume that utility is cardinal?
> And I have no reason to believe
> that this is not a good approximation.
The empirical reasons for doubting the canonical neoclassical model
on these grounds lie in Amos Tversky's experiments and the empirical
support for Brian Arthur's increasing-returns economics.
> > > The only question is how to add
> > > utility and money, but if you add the marginal utility of consumption
> > > expenditure into your equations (which you apparently forgot) there
> > > is a meaningful "conservation law" also in economics.
> >
> > Please expand.
>
> Remember microenomics classes? The marginal utility of consumption
> expenditure (the Lagrangian multiplicator) is necessary to transform
> utility into monetary variables.
It is true that I took some undergraduate microeconomics classes some
time ago. Most of my knowledge of economics, though, is obtained from
outside reading.
I did not "forget" anything. The math I presented was my interpretation
of what Mirowski says is the canonical neoclassical model. This model, as
presented by Mirowski, has some shortfalls or approximations related to
constraints. Perhaps these inadequacies are justified in Mirowski's
book for making the historically accurate point that utility is a
metaphor for energy in neoclassical theory. These inadequacies have
provided a point of criticism for Mirowski's reviewers, for example,
Hal Varian.
A rebuttal to Varian's location of errors in Mirowski can be found in
D. Wade Hands' essay in _Rethinking the History of Economic Thought_,
edited by deMarchi. In this book, distinguished historians and philosophers
of science, and historians of economics, directly address Mirowski theses.
D. Wade Hands shows that the Slutsky conditions do indeed imply that
neoclassical theory is based on the existence of a conservative vector field,
as I indicated in a previous post. But it's never been clear to me
exactly what's conserved. As I stated, the conservation of the sum of
income and utility is implied only if income effects are negligible.
Mirowski considers the role of the Lagrangian multipliers in a section
called "The sciences were never at war?" in _More Heat than Light_.
Mirowski considers an interchange of letters between the mathematician
Hermann Laurent and Walras (and later Pareto). Laurent does show
marginal utility proportional to price, not equal. He asks Walras for
an interpretation of the integrating factor. Among other evasive
responses, Walras says that the integrating factor is the marginal
utility of the numeraire or, as Marshall would have it, the marginal
utility of money. Mirowski thinks this was an inadequate response to
Laurent, who wanted to know why prices form a *conservative* vector
field.
Markku Stenborg
On 17 Aug 1997 17:00:14 GMT, removethis!rv...@dreamscape.com (Robert
Vienneau) wrote:
> Markus Diehl wrote:
[snip]
> Do you the agree the question of whether or not the second derivative
> of an utility function exists is only meaningful if utility attains
> at least an interval measurement-scale level? That is, the canonical
> neoclassical model does indeed assume that utility is cardinal?
I'm no Markus, but the existence of some derivate does in nobloodyway
imply that utility is cardinal. You should know better than making
this kind of stupid claim; the measurement of utility is arbitrary
other than the ranking of the alternatives.
> > And I have no reason to believe
> > that this is not a good approximation.
>
> The empirical reasons for doubting the canonical neoclassical model
> on these grounds lie in Amos Tversky's experiments and the empirical
Tversky's experiment only cast doubt on some of the simplest forms of
expected utility, not on neoclassical economics. You need another
angle to reject neoclassical economics.
[snip]
> D. Wade Hands shows that the Slutsky conditions do indeed imply that
> neoclassical theory is based on the existence of a conservative vector field,
> as I indicated in a previous post. But it's never been clear to me
> exactly what's conserved. As I stated, the conservation of the sum of
> income and utility is implied only if income effects are negligible.
Although adding income and utility might be logically possible
operation, the obtained result contains nothing interesting from econ
point of view, from phil of science, or on any other reasonable point
of view, for that matter.
[snip]
Matt Kennel (Remove 'NOSPAM' to reply)
On Mon, 18 Aug 1997 05:35:03 GMT, Markku Stenborg
:Tversky's experiment only cast doubt on some of the simplest forms of
:expected utility, not on neoclassical economics. You need another
:angle to reject neoclassical economics.
Like if the 'potential function' is time dependent, and thus conservation
laws aren't?
:Markku Stenborg
--
* Matthew B. Kennel/Institute for Nonlinear Science, UCSD -
* "People who send spam to Emperor Cartagia... vanish! _They say_ that
* there's a room where he has their heads, lined up in a row on a desk...
* _They say_ that late at night, he goes there, and talks to them... _they
*- say_ he asks them, 'Now tell me again, how _do_ you make money fast?'"
Markku Stenborg
On 18 Aug 1997 23:07:16 GMT, ken...@nospam.lyapunov.ucsd.edu (Matt
Kennel (Remove 'NOSPAM' to reply)) wrote:
> On Mon, 18 Aug 1997 05:35:03 GMT, Markku Stenborg
> :Tversky's experiment only cast doubt on some of the simplest forms of
> :expected utility, not on neoclassical economics. You need another
> :angle to reject neoclassical economics.
>
> Like if the 'potential function' is time dependent, and thus conservation
> laws aren't?
The great wisdoms this paragraph surely contains unfortunately fail to
register in my very limited understanding.
Edward Vytlacil
In article <removethis!rvien-14089...@ua1-b16.dreamscape.com>,
Robert Vienneau <removethis!rv...@dreamscape.com> wrote:
>In article <33f24670...@news.eunet.fi>, real.a...@bottom.of.msg
>(Markku Stenborg) wrote:
>
>> Vienneau) wrote:
>>
>> [snip]
>>
>> > In Newtonian mechanics, the sum of potential and kinetic energy
>> > is constant. Just so, the sum of utility and income is conserved in
>> > neoclassical economics. Don't ask economists why; they have no answer.
>>
>> inadequately expressed. The utility functions are arbitrary up to
>> monotonic transformations. If U is the utility function representing
>> some preferences, V = f(U), f' > 0, also represents exactly the same
>> preferences. Sum of U + Y is rarely equivalent to the sum f(U) + Y,
>> where Y is the income, so the statement concerning these sums is
>> confused, at min.
>
>temperature in Fahrenheit in the U.S. and they use Centigrade in
>Finland? Similarly, when physicists say that the distance between
>two events is invariant between reference frames, they don't mean
>that it is numerically equal when distances are measured in both
>meters and feet.
>
Do you understand what it means for a variable to be ordinal? And
why your examples are not ordinal but utility is?
Ed Vytlacil
Edward Vytlacil
In article <removethis!rvien-17089...@ub24.dreamscape.com>,
Robert Vienneau <removethis!rv...@dreamscape.com> wrote:
[cut]
>
>Markus,
>
>Do you the agree the question of whether or not the second derivative
>of an utility function exists is only meaningful if utility attains
>at least an interval measurement-scale level? That is, the canonical
>neoclassical model does indeed assume that utility is cardinal?
>
No.
The sign of the second derivative is not meaningful for an ordinal
variable. Which is why it doesn't make sence to say "declining
marginal utility." But whether the second derivative exists is
still meaningful.
Ed
Robert Vienneau
Ed Vytlacil writes:
> Robert Vienneau <removethis!rv...@dreamscape.com> wrote:
> [cut]
> >
> >Markus,
> >
> >Do you the agree the question of whether or not the second derivative
> >of an utility function exists is only meaningful if utility attains
> >at least an interval measurement-scale level? That is, the canonical
> >neoclassical model does indeed assume that utility is cardinal?
> >
>
> No.
>
> The sign of the second derivative is not meaningful for an ordinal
> variable. Which is why it doesn't make sence to say "declining
> marginal utility." But whether the second derivative exists is
> still meaningful.
The measurement scales of a variable is defined by the largest set
of transformations of a variable that preserves the truth value of all
propositions in the theory in which the variable enters. This is
explained in good books on measurement theory:
D. Krantz, R. D. Luce, P. Suppes, and A. Tversky, _Foundations of
measurement: Volume I. Additive and polynomial representations,
Academic Press, 1971. Suppes et al, Vol II, 1989. Luce et al, Vol III,
1990.
F. S. Roberts, _Measurement Theory: With applications to decisionmaking,
utility, and the social sciences_, Addison-Wesley, 1979.
For a statement about an ordinal variable to be *meaningful*, it's truth
value must be invariant to *all* monotonic increasing transformations. (This
is a technical definition of meaningfulness meant to explicate common
usage - you can find something like the same approach in Von Neumann and
Morgenstern.)
Now consider the statement that an utility function has continuous first
and second derivatives. Is the truth of this statement invariant to
monotone increasing transformations V = f( U )? Consider the following
transformation, for example
U, 0 < U
f( U ) = U^2, 0 <= U <= 1
U^3, U > 1.
Since the existence of a continous second derivative is not invariant
to such transformations, a statement about the existence of a continuous
second derivative of a utility function is not meaningful for utility
if utility is only measured along an ordinal scale.
For a variable to be measured along an interval (cardinal) scale, the truth
value of all statements about it must be invariant to all increasing affine
transformations. The assertion of the existence of a continuous 2nd
derivative is invariant. Note that any statement whose truth value is
invariant under a monotone increasing transformation will also be
invariant under an increasing affine transformation.
It occurs to me that perhaps even the existence of a first derivative of an
utility function is not invariant under all monotone increasing
transformations. So what becomes of the meaningfulness of the
statement "In equilibrium, relative prices are equal to the ratios
of marginal utilities"? If left hand and right hand derivatives
remain after a transformation, relative prices are still bounded
by appropriate ratios of the handed derivatives. Perhaps that's
enough to say that that statement only relies on ordinal properties
of utility. At least, I'm willing to say so.
It's also the case that when one considers what transformations leave
the truth value of a proposition unchanged, one must consider how
other variables enter the proposition. For instance, consider the
statement "The sum of potential and kinetic energy is constant".
The truth value of this statement is changed if only potential energy
undergoes a linear transformation. But this change in truth value
does not mean potential energy does not achieve a ratio measurement
scale. Rather the truth value of the statement is preversed if
any linear transformation of the units in which energy is measured
is simultaneously applied to potential energy, kinetic energy, and
the constant.
Now consider the interchange:
Ed Vytlacil wrote:
> >(Markku Stenborg) wrote:
> >
> >> On 12 Aug 1997 22:03:39 GMT, removethis!rv...@dreamscape.com (Robert
> >> Vienneau) wrote:
> >>
> >> [snip]
> >>
> >> > In Newtonian mechanics, the sum of potential and kinetic energy
> >> > is constant. Just so, the sum of utility and income is conserved in
> >> > neoclassical economics. Don't ask economists why; they have no answer.
> >>
> >> This economists knows that the claim is not true -- or, at least,
> >> inadequately expressed. The utility functions are arbitrary up to
> >> monotonic transformations. If U is the utility function representing
> >> some preferences, V = f(U), f' > 0, also represents exactly the same
> >> preferences. Sum of U + Y is rarely equivalent to the sum f(U) + Y,
> >> where Y is the income, so the statement concerning these sums is
> >> confused, at min.
> >
> >This objection is confused. Is it meaningless to compare how warm it is
> >in some cities in the U.S. and in Finland because we measure the
> >temperature in Fahrenheit in the U.S. and they use Centigrade in
> >Finland? Similarly, when physicists say that the distance between
> >two events is invariant between reference frames, they don't mean
> >that it is numerically equal when distances are measured in both
> >meters and feet.
>
> Do you understand what it means for a variable to be ordinal? And
> why your examples are not ordinal but utility is?
I still maintain that Markku's objection is poorly expressed, at
least. And Ed Vytlacil's rejoinder is a non sequitur.
I still find it odd that neoclassical economists would be willing
to countenance talk about the second derivative of utility functions.
Anyways Matt Kennel had a good summary of my understanding of part of
the point of Mirowski's critique of neoclassical economics:
"Like if the 'potential function' is time dependent, and thus conservation
laws aren't?"
Try addressing that point if you want to defend neoclassical economics.
On the other hand, the economists responding to this thread have made it
clear they're not interested in serious discussion about Mirowski. So we
might as well move on to other threads.
Robert Vienneau
In article <3402796e...@news.eunet.fi>, real.a...@bottom.of.msg
(Markku Stenborg) wrote:
> On 24 Aug 1997 12:44:14 GMT, removethis!rv...@dreamscape.com (Robert
> Vienneau) wrote:
>
> [snip]
>
> > It occurs to me that perhaps even the existence of a first derivative of an
> > utility function is not invariant under all monotone increasing
> > transformations. So what becomes of the meaningfulness of the
>
> Not "perhaps", but "definitely". Hint: try some non-smooth
> transformation.
Markku,
I included the "perhaps" only because I did not bother thinking up
an example.
> > statement "In equilibrium, relative prices are equal to the ratios
> > of marginal utilities"? If left hand and right hand derivatives
>
> Nothing? These manipulations of utility functions leave the original
> indifferencce curves intact.
Uh, the existence of marginal utilities is only true for some
of the utility-function representations of preferences. So the
ratios of marginal utilities is only defined for some representations,
as well. I agree the truth value of a proposition equating
the marginal rate of substitution to relative prices is invariant
to all monotone increasing transformations of utility functions.
Is that what you are trying to say?
> [snip]
>
> > I still maintain that Markku's objection is poorly expressed, at
> > least. And Ed Vytlacil's rejoinder is a non sequitur.
>
> In other words, you admit being mistaken?
No, I was being polite.
[...]
> One reading of Mirowski was enough to convince me that the title of
> the book well describes its contents.
Good joke.
Markus,
I remind you that you are the one who brought up second derivatives
of utility functions. And I fail to see how my opinion of typical
summaries of Friedman's methodology is relevant at all to this
thread.
--
Robert Vienneau Try my Mac econ simulation
removethis!rvien_at_future.dreamscape.com game, Bukharin, at
Autry
> > 2. Do we have any theory of value which can explain it correctly
> and
> > logically?
>
> value.
> The following critiques (in reverse chronological order) show
> Neoclassical
> economics to be incoherent and insufficiently general:
>
Isn't value determined by what an individual is willing to pay? With the
market reflecting the aggregate of individual choices? For "mainstream
economists" to have a correct and logical theory of value ( other than
the subjective theory of value ) wouldn't they need omniscient knowledge
of all individual valuations, above and beyond what the market reflects?
Autry
Markus Diehl
Robert Vienneau wrote:
>
> Markus,
>
> I remind you that you are the one who brought up second derivatives
> of utility functions. And I fail to see how my opinion of typical
> summaries of Friedman's methodology is relevant at all to this
> thread.
>
Hi Robert,
OK, I used the expression "as-if" but I didn't want to refer to Milton.
My arguments were: first, you only need the PROPERTY of (second order-)
differentiability for the path independence; the VALUE of the second
derivative is irrelevant. Second, the shape of indifference curves is all
that matters, and AFAIK any proposition in demand theory is independent
of the specific arithmetic description (ie. the utility function) chosen.
IOW it doesn't matter which twice differentiable function you choose, as
long as they describe the indifference curves correctly.
CU, Markus
PS: I remind you that you are the one who brought up an unfinished (or
"handwaving") argument about the inconsistency caused by the fact that
fans of ordinal utility concepts employ (cardinal) utility functions. I
still do not see your point, since you are often mixing arguments against
SPECIFIC assumptions about consumer preferences (transitivity, time
invariance etc.) with arguments against utility functions PER SE.