Greg Mankiw wrote: > After > all, it is also a standard result that in a competitive equilibrium, the > factors of production > are paid the value of their marginal product. That is, each person’s income > reflects the value of what he contributed to society’s production of goods > and services.
Dr. Mankiw doesn't know economics, does he? (Where did he get his Ph.D.? some third-rate place like the University of Chicago economics department?)[*] Even with perfectly competitive markets and "a standard set of assumptions," the owners of so-called factors of production are paid the market price of the _private_ marginal product of the factors. That is, unless the "standard set of assumptions" involve willful ignorance of external costs and benefits, even under competition the owner of a stinky factory (say, in Bhopal) gets paid according the market price of the last unit of output produced and sold by the factory (at any given time) with no deductions for the cost of the people killed by the plant's operations or the cost of long-term damage to the natural environment. Of course, the owners of the physical means of production receive an extra bonus simply because they own and "monopolize" them (and the vast majority of us are thus dependent on their good will if we want to live a normal lifestyle as defined by our society). This bonus is what textbook economics calls "normal profits" and treats as a cost. BTW, who was it who decide what the "standard set of assumptions" were and that they were acceptable? -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. [*] I answered my own rhetorical question: it's MIT. Oh, the mighty have fallen! _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
