RE: [OPE] Constant returns to scale - IRS

Re. Alejandro’s excerpt from Jerry, 1):

a) Why can I not reconstruct this argument in terms of abstraction and concretisation? Perfect competition is an abstraction that thus may capture something real about the meaning of competition; imperfect competition models are also abstractions, but emerge in the presentation as conceptual transcendences of contradictions at the more abstract level of perfect competition; they are concretisations.

b) Comparative statics is an abstraction associated with perfect competition that captures something about the real world, whilst abstracting from the actual dynamic mechanisms that have to be conceptualised in order to move towards the actual concrete.

Re: Alejandro’s excerpt from Jerry, 2):

But this is simply untrue. Economies of scale/down-sloping LRAC conceptualise the competitive advantage that certain kinds of technology reflected in costs structures provide; then profit-maximising capitalists will exploit those technologies to grow bigger and to shield themselves from competition (strategic barriers to entry etc.); economies of scale and strategic entry deterrence also motivate mergers and takeovers. These dynamic processes can be modelled, inter alia in game theoretic models. This kind of theory of capitalists behaviour also grounds competition (anti-trust) policies by most capitalist states, but can also be extended to argue that a non-capitalist state would be more likely to pursue such policies rigorously. Etc.

comradely

michael

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From: ope-bounces@lists.csuchico.edu [mailto:ope-bounces@lists.csuchico.edu] On Behalf Of Alejandro Agafonow
Sent: 03 October 2008 15:34
To: Outline on Political Economy mailing list
Subject: Re: [OPE] Constant returns to scale - IRS

1) Jerry L: *Well, I think a part of the problem is the entire way in which 'competition'
is conceived of in mainstream economic theory. Most commonly, they create an 'ideal' which doesn't (and can not) conform to real-world conditions (perfect competition) and then contrast that to other 'market structure models' (monopoly, monopolistic competition, oligopoly). Among the many problems in so doing is that they take the *dynamic* subject of competition and try to analyze it simply in the realm of *comparative statics*.

I agree!

2) Jerry L: *Where this theory most dramatically fails is in its inability to explain how you get from one market structure to another. That is, there is no explanation of how the dynamic process of competition *itself* brings about concentration and oligopolization.*

Yes, but on this respect Austrian Economics is very good and has overcome the handicaps of Neoclassical Economics. So the problem seems not to be *marginalism* but deeper problems arising from the untractable phenomena that Mathematical Economics simply can’t handle.

Regards,

A. Agafonow

----- Mensaje original ----
De: GERALD LEVY <gerald_a_levy@msn.com>
Para: Outline on Political Economy mailing list <ope@lists.csuchico.edu>
Enviado: viernes, 3 de octubre, 2008 14:35:30
Asunto: RE: [OPE] Constant returns to scale - IRS

Hi Anders, Alejandro, et al:
 
 
Well, I think a part of the problem is the entire way in which 'competition'
is conceived of in mainstream economic theory. Most commonly, they
create an 'ideal' which doesn't (and can not) conform to real-world
conditions (perfect competition) and then contrast that to other
'market structure models' (monopoly, monopolistic competition,
oligopoly). Among the many problems in so doing is that they take
the *dynamic* subject of competition and try to analyze it simply
in the realm of *comparative statics*. Where this theory most
dramatically fails is in its inability to explain how you get from one
market structure to another. That is, there is no explanation of how
the dynamic process of competition *itself* brings about
concentration and oligopolization. Mainstream theory basically
amounts to "stuff (like oligopolies) happens" rather than a coherent
"story" of _how_ it happens. What this means in practice is that
mainstream economics can't make any sense out of real-world markets
and _that_ is why firms don't employ these concepts in their decision-
making since for firms these are _practical_ questions which they
can not allow marginalism to fog.
 

 
> Faced with the big questions of our time, like
> climate change, poverty in the "South", obscene
> income differentials in the developed countries,
> the most important and fundamental prices would
> be "political", high prices on fossil fuels,
> radical change in wages in the south (up) and
> capitalists/elites in the rich world (very much
> down). One would use prices to solve (in a
> continuous democratic process) and global dynamic
> optimisation problem = creating a sustainable,
> affluent and just economy. Prices should of
> course be rational , i.e. signal the labour and
> ecological costs involved, but they would have to
> be dynamic, to get the kind of technology we need/want.

 
 
Yes, but a precondition for the above is an awareness by
workers that they are citizens - first and foremost - of
the world. Easier said than done! Dealing with global
inequalities will surely lead to conflicts in a post-capitalist
world and I don't think it will simply be a question of increasing wages
in the South and decreasing the wealth of the capitalists
and elites of the North. If global equality and dealing
with global ecological costs means a reduction of the
standard of living of workers in Norway, do you think they
will agree to that sacrifice?
 
 
> This means that the separation of economics
> and politics is artificial (as the current
> bailout package demonstrates 110%), that
> production and distribution policies cannot be
> separated, that justice is an important factor in economics.
 
 
Yes, I agree, it isn't simply a question of developing an
'optimal' economic model which can be applied in a socialist
society.
 
 
In solidarity, Jerry

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Received on Sat Oct 4 14:59:20 2008