The person who has done the most to answer Ann's question is Georgescu-Roegen, who insisted that the basic problem is one of stocks & flows.
The whole marginal cost is a flow concept & stocks don't fit easily into that picture. Throw in increasing returns to scale & all of micro goes haywire. Please let me know what you come up with. On Thu, Sep 03, 2009 at 08:30:03AM -0400, Ann Davis wrote: > > 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 -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu michaelperelman.wordpress.com _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
