Sabri wrote: > Marginal cost means the first derivative of the cost function > with respect to quantity, provided that the cost function is > smooth with respect to quantity. How this is connected to > all these Maxian things is beyond me.
It's straightforward. But to see the connection, we need to think beyond markets. Abstract from markets, the divisions and conflicts of interest in a capitalist society -- all that. Then we'll be dealing with the bare *material* economic process, detached from its specific *social* form. There we have a society trying to produce what it needs to consume and pursue its ends. As Smith noted, people will be "trading" there, not with one another, but with the rest of nature. So, what determines the terms of "trade" between society and the rest of nature? The ultimate resource society counts on is the productive force of its labor, under various guises -- e.g. "dead" labor power (aka means of production) and living labor power. Now, society has to produce many goods. If society were to economize its productive force, how would it proceed? *Approximately*, the actual trial-and-error mechanism of resource allocation will have to follow the gradient. In other words, the terms of trade will be given by marginal rates of transformation of resources into goods = marginal rates of substitution between goods; marginal costs = marginal benefits. When you fragment social production and consumption into individual private, independent units, and allow some competition, the social marginals will appear to the other side of each market as prices -- or, more precisely, as inverse demand *or* inverse supply functions, p(x). Do actual trial-and-error mechanisms of resource allocation -- concrete social arrangements like markets, households, firms, governments, etc. -- conform to this across the board equalization? Do they follow the gradient? One way or another, insofar as they exhibit some degree of historical viability, they *have to* keep those "proportions" (the term Marx used). What if their actual behavior deviates largely from the direction of the gradient? That is certainly bound to happen, the more so the more people tolerate those deviations. But, historically, people do exhibit some intolerance towards very large and/or persistent deviations. What economists call the "self-correcting mechanism" of markets or, in Marxist terms, competition and the class struggle kick in at some point and realign things. I know that there are technical assumptions of continuity and smoothness, convexity, etc. for the calculus to work, for an equilibrium to exist, to be unique, etc., but that is *not* the main point here. Not sure if it was Von Neumann who called calculus the math of approximation. Art (in this case the math of approximation) imitates life. People do try to economize their time. In that sense, they behave as if they were following the gradient. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
