Economics Dictionary of ArgumentsHome
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| Marginal productivity: Marginal productivity in economics refers to the additional output produced when one more unit of an input (e.g., labor or capital) is added, keeping other inputs constant. It measures the contribution of that extra input to total production and typically diminishes as input usage increases, a concept known as the law of diminishing marginal returns. See also productivity, marginal costs, marginal utility, production factors. See also Marginal product._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Murray N. Rothbard on Marginal Productivity - Dictionary of Arguments
Rothbard III 577 Marginal productivity/labour/Rothbard: there is danger in using a term such as “productivity of labor.” Suppose, for example, we state that “the productivity of labor has advanced in the last century.” The implication is that the cause of this increase came from within labor itself, i.e., because current labor is more energetic or personally skillful than previous labor. This, however, is not the case. Rothbard III 578 Marginal productivity: An advancing capital structure increases the marginal productivity of labor, because the labor supply has increased less than the supply of capital goods. This increase in the marginal productivity of labor, however, is not due to some special improvement in the labor energy expended. It is due to the increased supply of capital goods. The causal agents of increased wage rates in an expanding economy, then, are not primarily the workers themselves, but the capitalist-entrepreneurs who have invested in capital goods. The workers are provided with more and better tools, and so their labor becomes relatively scarcer as compared to the other factors.(1) Labour: That each man receives his marginal value product means that each man is paid what he is worth in producing for consumers. But this does not mean that increases in his worth over the years are necessarily caused by his own improvement. On the contrary (…) the rise is primarily due to the increasing abundance of capital goods provided by the capitalists. Rothbard III 579 It is, then, clearly impossible to impute absolute “productivity” to any productive factor or class of factors. In the absolute sense, it is meaningless to try to impute productivity to any factor, since all the factors are necessary to the product. We can discuss productivity only in marginal terms, in terms of the productive contribution of a single unit of a factor, given the existence of other factors. >Productivity/Rothbard, >Production factors. Rothbard III 590 Marginal productivity analysis and the profit motive are suffcient to explain the prices of productive factors and their allocation to various firms and industries in the economy. Furthermore, there are in production theory two important and interesting concepts involving periods of time. One is what we may call the "immediate run" - the market prices of commodities and factors on the basis of given stocks and speculative demands and given consumer valuations. The immediate run is important, since it provides an explanation of the actual market prices of all goods at any time. The other important concept is that of the "final price," or the long-run equilibrium price, i.e., the price that would be established in the ERE. >Evenly Rotating Economy. This is important because it reveals the direction in which the immediate-run market prices tend to move. It also permits the analytic isolation of interest, as compared to profit and loss, in entrepreneurial incomes. >Gain and Loss/Rothbard, >Profit/Rothbard, >Income/Rothbard, Price/Rothbard. In the ERE all factors will receive their discounted marginal value product, and interest will be pure time preference; there will be no profit and loss. 1. It should be understood throughout that when we refer to increases in wage rates or ground rents in the expanding economy, we are referring to real, and not necessarily to money, wage rates or ground rents._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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