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The author or concept searched is found in the following 7 entries.
| Disputed term/author/ism | Author |
Entry |
Reference |
|---|---|---|---|
| Coase Theorem | Coase | Mause I 416f Coase theorem/intervention/environmental policy/externalities/CoaseVsPigou: Coase 1960 (3): in the case of (environment-related) external effects, there are no "polluters" or "victims" per se. Rather, a reciprocal character of external effects is to be assumed, i.e. if environmental impacts are allowed there are disadvantaged people, if these are prevented, there are also disadvantaged people. The reason for this is that environmental problems contain rival claims to use of environmental goods, which can basically be corrected in two possible directions (Hartwig 1992, p. 140 ff.(4); Feess und Seeliger 2013, p. 141 ff.(5)). Example: An improvement of injured parties leads to costs on the part of the polluters. Solution/Coase: Coase theorem: if there are no transaction costs, there is no need for government intervention to internalise external effects, as in this case the market leads to an optimal solution of the environmental problem in the form of private negotiations between the parties concerned. (See Transaction Costs/Coase). Against: PigouVsCoase: Interventions/environmental policy/Pigou: Although not originally developed on the basis of environmental problems, Pigou (1920) took the view early on that the market cannot be left to itself in the case of external effects. Rather - so the argumentation - sovereign interventions are required, that contribute to an internalisation of externalities according to polluters since only by means of such state interventions can private and social costs or benefits be covered with the aim of increasing the welfare of society as a whole. In order to prevent the misallocation of scarce (environmental) resources and thus a sub-optimal market supply of private goods, external costs or external income must be internalised by way of taxation (so-called Pigou taxes) or state subsidisation (Hansjürgens 1992, p. 28ff (1); Endres 2000, p. 94ff (2)). Coase theorem: The Coase theorem thus contains both an efficiency and an invariance statement: In the event of non-existence of transaction costs, optimal (or more efficient) environmental protection is always achieved, regardless of how the rights to use the natural resources are distributed between the actors concerned in the initial situation. VsCoase: In reality, however, such private negotiated solutions often involve specific problems that can lead to a failure of the pure market solution of environmental problems (Feess und Seeliger 2013, p. 147 ff.; Endres 2000, p.41ff.) On the one hand, it must be taken into account that the distribution of usage rights in the initial situation does not impair the efficiency effect of the negotiation result, but rather its distributional effect. 1. Bernd Hansjürgens, Umweltabgaben im Steuersystem. Zu den Möglichkeiten einer Einfügung von Umweltabgaben in das Steuer- und Abgabensystem der Bundesrepublik Deutschland. Baden-Baden 1992.. 2. Alfred Endress, Umweltökonomie, Stuttgart 2000. 3. Ronald Coase. 1960. The problem of social cost. Journal of Law and Economics 3: 1– 44. 4. Karl-Hans Hartwig, Umweltökonomie. In Vahlens Kompendium der Wirtschaftstheorie und Wirtschaftspolitik, Hrsg. Dieter Bender, Hartmut Berg, Dieter Cassel, Günter Gabisch, Karl-Hans Hartwig, Lothar Hübl, Dietmar Kath, Rolf Peffekoven, Jürgen Siebke, H. Jörg Thieme und Manfred Willms, Bd. 2, 5. Aufl., 122– 162. München 1992. 5. Eberhard Feess, & Andreas Seeliger. 2013. Umweltökonomie und Umweltpolitik, 4. Aufl. München 2013. |
Mause I Karsten Mause Christian Müller Klaus Schubert, Politik und Wirtschaft: Ein integratives Kompendium Wiesbaden 2018 |
| Coase Theorem | Miceli | Parisi I 19 Coase theorem/Miceli: Coase’s original motivation in writing his seminal paper on externalities(1) was to offer a critique of the Pigovian view, which asserted that some form of government intervention (taxes, fines, or liability) was required to internalize external harm, such as that caused by straying cattle or railroad sparks. Causation/Pigou: Absent such intervention, the Pigovian view maintained, the “cause” of the harm (the rancher or the railroad) would over-engage in the harmful activity. CoaseVsPigou: Coase challenged this view by first noting that causation is reciprocal in the sense that both the injurer and victim must be present for an accident to occur. The designation of one party as the “injurer” is therefore arbitrary and in fact represents an implicit awarding of the right to be free from harm to the other party (the “victim”). Pigovian view: (...) the farmer has the right to be free from crop damage - whether from straying cattle or spewing sparks - and so the rancher or the railroad should be compelled to pay the farmer’s cost. Problem: (...) suppose the farmer-victim is in a better position to avoid the harm, say by moving his crops or not locating near the railroad or ranch in the first place. In that case, the designation of the rancher/railroad as the injurer may actually preclude the identification of more efficient ways of avoiding the harm. Coase’s point in raising the causation issue was to evaluate the conditions under which court-imposed liability is needed to internalize the external harm. Suppose, for example, that in the rancher–farmer dispute the court does not intervene to assign liability to the rancher. Does that necessarily mean that the rancher’s herd will expand inefficiently? Marginal benefit/marginal cost: The answer, of course, is no, provided that the parties can bargain, because if bargaining is possible, the farmer would be able to bribe the rancher to reduce the herd to the point where the marginal benefit from the last cow equals the marginal cost. In this case, property rights in straying cattle effectively belong to the rancher, and the farmer has to “purchase” them, which he will do up to the point where the two parties value the last cow equally. VsPigovian view: Note that this is the reverse of what happens under the Pigovian solution, where the farmer is (implicitly) awarded rights to the straying cattle and the rancher has to purchase them by paying the court-imposed damages. Efficiency: In both cases, however, the outcome will be efficient. Coase: This conclusion - that the initial assignment of property rights does not affect the final distribution of resources, which is efficient - is the Coase Theorem. External costs: [Key point]: When the conditions for the Coase Theorem are satisfied - that is, when bargaining is possible - the assignment of liability for external harms does not affect efficiency because the parties will rearrange any initial assignment of rights to the point where the gains from trade are exhausted. In this sense, the law does not matter for efficiency (though it does affect the distribution of wealth).* Law: When bargaining is not possible, in contrast, the law does matter because the parties will not be able to rearrange inefficient assignments of rights. As a result, the law must be designed with the explicit goal of efficiency in mind. In this way, the Coase Theorem defines the efficient scope for legal intervention (Demsetz, 1972)(2). >Liability/Calabresi/Melamed. * The conclusion that the efficient allocation of resources will be achieved regardless of the initial assignment of legal rights mirrors the First Fundamental Theorem of Welfare Economics, which says that market exchange will be efficient regardless of how property rights are initially assigned. The >Coase Theorem thus shows that externalities need not preclude this outcome as long as bargaining costs are low. Cf. >Liability/Calabresi/Melamed. 1. Coase, Ronald (1960). “The Problem of Social Cost.” Journal of Law and Economics 3: 1–44. 2. Demsetz, Harold (1972). “When Does the Rule of Liability Matter?” Journal of Legal Studies 1: 13 - 28. Miceli, Thomas J. „Economic Models of Law“. In: Parisi, Francesco (ed) (2017). The Oxford Handbook of Law and Economics. Vol 1: Methodology and Concepts. NY: Oxford University Press. |
Parisi I Francesco Parisi (Ed) The Oxford Handbook of Law and Economics: Volume 1: Methodology and Concepts New York 2017 |
| External Economies | Rothbard | Rothbard III 1038 External Economies/Rothbard: An important case of external benefits is "external economies," which could be reaped by investment in certain industries, but which would not accrue as profit to the entrepreneurs. >External benefit/Rothbard. There is no need to dwell on the lengthy discussion in the literature on the actual range of such external economies, although they are apparently negligible. Protective tariff/Pigou: The suggestion has been persistently advanced that the government subsidize these investments so that "society" can reap the external economies. Such is the Pigou argument for subsidizing external economies, as well as the old and still dominant "infant industries" argument for a protective tariff. Free market/RothbardVsPigou: The call for state subsidization of external economy investments amounts to a third line of attack on the free market, i.e., that B, the potential beneficiaries, beforced to subsidize the benefactors A, so that the latter will produce theformer's benefits. For the first and second attac see Free market/economic theories. This (…) line is the favorite argument of economists for such proposals as government-aided dams or reclamations (recipients taxed to pay for their benefits) or compulsory schooling (the taxpayers will eventually benefit from others' education), etc. The recipients are again bearing the onus of the policy; but here they are not criticized for free riding. They are now being "saved" from a situation in which they would not have obtained certain benefits. RothbardVs: Since they would not have paid for them, it is diffcult to understand exactly what they are being saved from. Costs: The third line of attack therefore agrees with the first that the free market does not, because of human selfishness, produce enough external-economy actions; but it joins the second line of attack in placing the cost of remedying the situation on the strangely unwilling recipients. Coercion: If this subsidy takes place, it is obvious that the recipients are no longer free riders: indeed, they are simply being coerced into buying benefits for which, acting by free choice, they would not have paid. Rothbard III 1039 RothbardVs: The absurdity of the third approach may be revealed by pondering the question: Who benefits from the suggested policy? The benefactor A receives a subsidy, it is true. But it is often doubtful if he benefits, since he would otherwise have acted and invested profitably in some other direction. The state has simply compensated him for losses which he would have received and has adjusted the proceeds so that he receives the equivalent of an opportunity forgone. Therefore A, if a business firm, does not benefit. As for the recipients, they are being forced by the state to pay for benefits that they otherwise would not have purchased. How can we say that they "benefit"? A standard reply is that the recipients "could not" have obtained the benefit even if they had wanted to buy it voluntarily. Secondly, there is no reason Why the prospective recipients could not have bought the benefit. In all cases a benefit produced can be sold on the market and earn its value product to consumers. |
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 |
| Externalities | Pigou | Kiesling I 20 Externalities/Pigou/Kiesling: [Ronald] Coase’s impetus to explore [the] question [of social costs] arose from the work of A.C. Pigou (1920)(1), who in the 1920s developed much of the theory of welfare economics, which is still in use today. In the paper mill situation, Pigou’s “external cost theory” would start from the point that the paper mill is creating a cost and imposing it on others who are not party to the paper-making transaction. Therefore, the paper mill should pay for the harm associated with that cost. Solution/Pigou: Pigou’s analysis implied a specific policy recommendation, specifically, a tax on paper to reflect the per-unit cost of the discharge into the river, or a regulation on the paper mill to induce it to incorporate the cost of its discharge into its accounting. Kiesling I 21 This logic has come to be known as “polluter pays,” or that a party that creates a cost should be the one to bear it. CoaseVsPigou. > Kiesling I 23 Transaction cost/externalities/Coase/Pigou/Kiesling: (…) when defining property rights is prohibitively costly or not feasible (as in, say, air pollution), bargaining to negotiate transfers of rights cannot happen. Property rights definition and enforcement costs are a category of transaction costs. Low transaction cost: Situations with low transaction costs are more likely to see welfare-enhancing bargaining, while … High transaction cost: …high transaction costs can prevent such conflict resolution. Example: An example of Pigou’s that Coase discusses for other reasons illustrates the challenge of transaction costs: the operation of a railroad through rural land in the 19th century. Railroad companies purchased land and built rail networks to run trains pulled by coal-fired steam locomotives, which threw off sparks that could cause fires that destroyed some adjoining crops or woodlands. In a situation such as the transcontinental railroad in the United States, the railroad company operated over thousands of miles and could potentially emit sparks on land owned by thousands of different farmers. This situation and others like it present a considerable transaction cost challenge, one that is common in many situations where there is a conflict in resource uses. Bargaining: In order for the farmers to bargain with the railroad over the rights to emit sparks and the rights to unharmed crops enough farmers would have to gather together to represent the interests of all affected farmers - in other words, the transaction costs would be high. In situations like these, the courts determine which party has legal liability for harms created, and enforce compensation if necessary. Pervasiveness: An overarching theme of Coase’s work on social cost is that transaction costs are pervasive. Because of that pervasiveness courts are important institutions whose decisions have implications for both the efficiency of outcomes and the distribution of profits across parties. >Law/Coase. 1. Pigou, Arthur Cecil (1920/2013). The Economics of Welfare. Palgrave Macmillan. |
EconPigou I Arthur C. Pigou The Economics of welfare London 1920 |
| Interventionism | Pigou | Mause I 415f Interventions/Environmental Policy/Pigou: Although not originally developed on the basis of environmental problems, Pigou (1920) took the view early on that the market cannot be left to itself in the case of external effects. Rather - so the argumentation - sovereign interventions are required, that contribute to an internalisation of externalities according to polluters since only by means of such state interventions can private and social costs or benefits be covered with the aim of increasing the welfare of society as a whole. In order to prevent the misallocation of scarce (environmental) resources and thus a sub-optimal market supply of private goods, external costs or external income must be internalised by way of taxation (so-called Pigou taxes) or state subsidisation (Hansjürgens 1992, p. 28ff (1); Endres 2000, p. 94ff (2)). Intervention/Externalities/CoaseVsPigou: Coase 1960 (3): in the case of (environmental) external effects, there are no "polluters" or "victims" per se. Rather, a reciprocal character of external effects is to be assumed, i.e. if environmental impacts are allowed there are disadvantaged people, if these are prevented, there are also disadvantaged people. The reason for this is that environmental problems contain rival claims to use of environmental goods, which can basically be corrected in two possible directions (Hartwig 1992, p. 140 ff.(4); Feess und Seeliger 2013, p. 141 ff.(5)). Example: An improvement of injured parties leads to costs on the part of the polluters. Solution/Coase: Coase theorem: if there are no transaction costs, there is no need for government intervention to internalise external effects, as in this case the market leads to an optimal solution of the environmental problem in the form of private negotiations between the parties concerned. (See Transaction Costs/Coase). 1. Bernd Hansjürgens, Umweltabgaben im Steuersystem. Zu den Möglichkeiten einer Einfügung von Umweltabgaben in das Steuer- und Abgabensystem der Bundesrepublik Deutschland. Baden-Baden 1992.. 2. Alfred Endress, Umweltökonomie, Stuttgart 2000. 3. Ronald Coase. 1960. The problem of social cost. Journal of Law and Economics 3: 1– 44. 4. Karl-Hans Hartwig, Umweltökonomie. In Vahlens Kompendium der Wirtschaftstheorie und Wirtschaftspolitik, Hrsg. Dieter Bender, Hartmut Berg, Dieter Cassel, Günter Gabisch, Karl-Hans Hartwig, Lothar Hübl, Dietmar Kath, Rolf Peffekoven, Jürgen Siebke, H. Jörg Thieme und Manfred Willms, Vol. 2, 5.ed., 122– 162. München 1992. 5. Ebernhard Feess, & Andreas Seeliger. 2013. Umweltökonomie und Umweltpolitik, 4.ed. München 2013. |
EconPigou I Arthur C. Pigou The Economics of welfare London 1920 Mause I Karsten Mause Christian Müller Klaus Schubert, Politik und Wirtschaft: Ein integratives Kompendium Wiesbaden 2018 |
| Social Cost | Coase | Kiesling I 19 Social cost/Coase/Kiesling: „The question is commonly thought of as one in which A inflicts harm on B and what has to be decided is: how should we restrain A? But this is wrong. We are dealing with a problem of a reciprocal nature. To avoid the harm to B would inflict harm on A. The real question that has to be decided is: should A be allowed to harm B or should B be allowed to harm A? The problem is to avoid the more serious harm.“(1) Example: A town has a river running through it, with a running path and park along the river, a boat launch for kayaking and fishing, a water treatment facility, and a paper mill (see Yandle 1998(2)). The paper mill produces products and sells them to consumers who value the products. This transaction defines the mutuallybeneficial interaction between parties at the heart of human exchange. The paper firm earns profits from paper sales when its revenues exceed its costs, and paper consumers earn net satisfaction when they derive more benefit from the paper than the cost to them of purchasing it. Both parties weigh benefits and costs in making their choices over resource use. Problem: If we examine the paper mill’s production more closely, though, we see some costs that may not be reflected fully in the accounting costs we typically associate with such a calculation. For example, producing paper generates waste by-products. Competition: The firm competes for consumers’ business, so it has strong incentives to minimize costs. Disposing of waste is costly, so the paper firm has an incentive to discharge its waste into the river if it can do so at no cost. That waste depletes oxygen in the water and is unattractive, so the company’s “free” waste disposal may create costs that other river users have to bear. Kiesling I 20 But because the paper firm does not pay for disposing of its waste in the river, neither the producer nor the consumer of paper, the two parties to the market transaction, bear that cost. Cost: Instead, the cost shows up in diminished enjoyment of the riverside park, less pleasant kayaking and reduced fishing, a lower quality ecosystem due to depleted oxygen, and additional costs of treatment for water consumption. Coase: Coase called this problem “the problem of social cost” and wrote an article of the same name on the topic in 1960(1). >Externalities/Pigou. Pigou’s analysis(3) implied a specific policy recommendation, specifically, a tax on paper to reflect the per-unit cost of the discharge into the river, or a regulation on the paper mill to induce it to incorporate the cost of its discharge into its accounting. Kiesling I 21 This logic has come to be known as “polluter pays,” or that a party that creates a cost should be the one to bear it. A. Solution/CoaseVsPigou: Coase looked at such problems differently, asking instead what the leastcost way of dealing with this problem was, assessing it as a problem of a conflicting use of a resource. This way of thinking about the problem identifies its property rights origins. While Pigou implicitly assumed that the “non-polluter” party has the right to be free from this harm, Coase instead acknowledged that in such cases the property rights definition is not necessarily clear, and that transaction costs limit the ability to define and enforce property rights. >Property rights/Coase. B. Problem/CoaseVsPigou: A related difference in Coase’s approach to the problem of social cost is to see the external cost problem as a reciprocal problem. Pigou: In Pigou’s analysis, the paper mill creates the waste discharge, the confectioner creates noise, and those actions impose costs on others. CoaseVsPigou: Coase argued that this framing of the problem is incomplete, because it misses the fact that the parties impose costs on each other precisely because they have different uses of the shared resource when property rights are not sufficiently well-defined. The paper mill wants to use the river to discharge waste, while the water treatment plant wants clean water to process for consumption, and the kayaker wants an attractive and clean river for recreation. At its core the problem of social cost is a dispute over property rights: “For Coase, natural resource and environmental protection problems typically arise when there is a need to balance these conflicting interests. Compensation: Whether an actor or group of actors is the ‘victim’ or ‘perpetrator’ of an ‘externality’ is fundamentally a question of who has the rights to engage in the activity concerned and if they wish to trade such rights for compensation” (Pennington 2015(4): 95). Coordination/cooperation: Coordination is difficult, and valuable resources become dissipated, because ownership is undefined. Collective goods: With there being no owner of the river (or the water that flows through it), the pollutant-emitting mill does not pay for the costs it imposes. Barggaining: Hence, bargaining over resource use, where the highest bid for the resource is identified, does not occur. The harmful effects from paper production may destroy clean water - even if clean water has a much greater social value. Kiesling I 22 Innovation/CoaseVsPigou: Coase argued that bargaining is a process that enables parties to learn and discover and to create through innovation lower-cost ways of mitigating such costs. In contrast, the Pigouvian approach presumes that the regulator knows the relevant costs and benefits well enough to determine the exact tax to impose to elicit the exactly optimal amount of paper production. PigouVsPigou: That presumption is unrealistic, as Pigou came to acknowledge later in his life. Cooperation/payments: After figuring out the best way to deal with the harm, the next logical question is, who pays for the filter—the water treatment facility or the paper mill? Where the law establishes property rights, it will be clear. If the mill has the right to pollute, the water treatment plant will pay. If the water treatment plant owns the water, the mill pays. Both parties have incentives to cooperate in enacting this solution if the cost of stopping the pollution is less than the value gained by allowing it to continue. Benefit: Crucially, this is also the requirement for societal gains–that the benefits exceed the costs. Special cases: Coase noted that such straightforward solutions might not unfold in cases where decision-making is decentralized, i.e., where property rights are not defined or in instances where transaction costs have kept the parties from making efficient bargains. In those instances, Pigouvian policies, such as a regulation mandating that paper mills install filters, might prove superior. But neither the market negotiation nor the regulatory approach is free. The two approaches should be compared and contrasted for their ability to foster social coordination, maximizing the value of the resources involved. >Property rights/Coase, >Transaction costs/Coase. Kiesling I 23 Transaction cost/externalities/Coase/Pigou/Kiesling: (…) when defining property rights is prohibitively costly or not feasible (as in, say, air pollution), bargaining to negotiate transfers of rights cannot happen. Property rights definition and enforcement costs are a category of transaction costs. Low transaction cost: Situations with low transaction costs are more likely to see welfare-enhancing bargaining, while … High transaction cost: …high transaction costs can prevent such conflict resolution. Example: An example of Pigou’s that Coase discusses for other reasons illustrates the challenge of transaction costs: the operation of a railroad through rural land in the 19th century. Railroad companies purchased land and built rail networks to run trains pulled by coal-fired steam locomotives, which threw off sparks that could cause fires that destroyed some adjoining crops or woodlands. In a situation such as the transcontinental railroad in the United States, the railroad company operated over thousands of miles and could potentially emit sparks on land owned by thousands of different farmers. This situation and others like it present a considerable transaction cost challenge, one that is common in many situations where there is a conflict in resource uses. Bargaining: In order for the farmers to bargain with the railroad over the rights to emit sparks and the rights to unharmed crops enough farmers would have to gather together to represent the interests of all affected farmers - in other words, the transaction costs would be high. In situations like these, the courts determine which party has legal liability for harms created, and enforce compensation if necessary. Pervasiveness: An overarching theme of Coase’s work on social cost is that transaction costs are pervasive. Because of that pervasiveness courts are important institutions whose decisions have implications for both the efficiency of outcomes and the distribution of profits across parties. >Law/Coase. 1. Coase, Ronald H. (1960). The Problem of Social Cost. Journal of Law and Economics 3: 1-44. 2. Yandle, Bruce (1998). Coase, Pigou, and Environmental Rights. In Peter J. Hill and Roger E. Meiners (eds.), Who Owns the Environment? (Rowman & Littlefield). 3. Pigou, Arthur Cecil (1920/2013). The Economics of Welfare. Palgrave Macmillan. 4. Pennington, Mark (2015). Coase on Property Rights and the Political Economy of Environmental Protection. In Cento G. Veljanovski (ed.), Forever Contemporary: The Economics of Ronald Coase. Institute of Economic Affairs. |
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| Velocity of Circulation | Fisher | Rothbard III 840 Velocity of Circulation/Fisher/Rothbard: Equation of Exchange/RothbardVsFisher: It is evident that PT, in the total equation of exchange, is a completely fallacious concept. While the equation E = pQ for an individual transaction is at least a trivial truism, although not very enlightening, the equation E = PT for the whole society is a false one. Neither P nor T can be defined meaningfully, and this would be necessary for this equation to have any validity. We are left only with E = pQ + p'Q', etc., which gives us only the useless truism, E =E.(2) >Equation of Exchange/Fisher. Equation of exchange: MV = PT. M - Money supply V - Velocity of circulation P – Price level T (or Q) - Expenditures Cf. >Price level/Fisher. Velocity: Let us consider the other side of the equation, E = MV, the average quantity of money in circulation in the period, multiplied by the average velocity of circulation. V is an absurd concept. Even Fisher, in the case of the other magnitudes, recognized the necessity of building up the total from individual exchanges. He was not successful in building up T out of the individual Q's, P out of the individual p's, etc., but at least he attempted to do so. But in the case of V, what is the velocity of an individual transaction? Velocity is not an independently defined variable. Fisher, in fact, can derive V only as being equal in every instance and every period to E/M. If I spend in a certain hour $ 10 for a hat, and I had an average cash balance (or M) for that hour of $200, then, by definition, my V equals 1/20. I had an average quantity of money in my cash balance of $200, each dollar turned over on the average of 1 /20 of a time, and consequently I spent $ 10 in this period. RothbardVsFisher/RothbardVsVelocity of circulation: But it is absurd to dignify any quantity with a place in an equation unless it can be defined independently of the other terms in the equation. Fisher compounds the absurdity by setting up M and V as independent determinants of E, which permits him to go to his desired conclusion that if M doubles, and V and T remain constant, p - the price level - will also double. But since V is defined as equal to E/M, what we actually have is: M x (E/M) = PT or simply, E = PT, our original equation. Thus, Fisher's attempt to arrive at a quantity equation with the price level approximately proportionate to the quantity of money is proved vain by yet another route. >Price level/Fisher. Solution/Pigou/Robertson: A group of Cambridge economists - Pigou, Robertson, etc. - has attempted to rehabilitate the Fisher equation by eliminating V and substituting the idea that the total supply of money equals the total demand for money. RothbardVsPigou/RothbardVsRobertson: However, their equation is not a particular advance, since they keep the fallacious holistic concepts of P and T, and their k is merely the reciprocal of V, and suffers from the latter's deficiencies. Cf. >Neo-Fisher-Effect. Rothbard: In fact, since V is not an independently defined variable, M must be eliminated from the equation as well as V, and the Fisherine (and the Cambridge) equation cannot be used to demonstrate the "quantity theory of money." And since M and V must disappear, there are an infinite number of other "equations of exchange" that we could, with equal invalidity, uphold as "determinants of the price level." Thus, the aggregate stock of sugar in the economy may be termed s, and the ratio of E to the total stock of sugar may be called "average sugar turnover," or U. This new "equation of exchange" would be: SU = PT, and the stock of sugar would suddenly become a major determinant of the price level. Or we could substitute A = number of salesmen in the country, and x = total expenditures per salesman, or "salesmen turnover," to arrive at a new set of "determinants" in a new equation. And so on. >Quantity theory. |
F.M. Fisher I Franklin M. Fisher Disequilibrium Foundations of Equilibrium Economics (Econometric Society Monographs) Cambridge 1989 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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