Beginning principles of micro one more time............the focus on marginal costs and marginal benefits, ignoring sunk costs, seems to make very clear how micro is simply ignoring the problem of capital. If capital investment can be interpreted as "sunk costs," it is "irrelevant." Mainstream economics has left this question entirely to "finance" and to accounting, it seems.
Michael Perelman's recent piece on "an Idiosyncratic Road to Crisis Theory" also expands upon this issue, as well as Harcourt's book from 1972, "Cambridge Controversies in the Theory of Capital" (as well as Michael's other books).
I add to my classes an alternative dynamic, within micro terminology, of the competition to lower AVC, by moving down the long term AC curve, in the increasing returns to scale section. But the investment decision is still very vague, and this process leads again to the zero profit equilibrium (which might be realistic within the context of perfect competition).
How do others handle this frustration? Suggestions are most welcome. Ann _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
