Markets, value prices Malthus, Bentham, Senior, and a bit参考.ppt

* * * * * * * * * * * * * * * * * * * * * * * Markets, value prices 15 Malthus, Bentham, Senior, and a bit of J.B. Say Thomas Malthus ---- a minister --- most of his discussion on economics is in political economy and the macroeconomics areasbut he has a few things to contribute in markets and operation of markets MALTHUS DEVELOPS A THEORY OF DIMINISHING RETURNS IN AGRICULTURE – apply more input and total production decreases --- marginal productivity decreases as more input is applied MALTHUS HOLDS A THEORY OF VALUE BASED IN A RUDIMENTARY NOTION OF SUPPLY AND DEMAND – J. S. MILL TAKES THIS UP LATER Labor input Agricultural Production Production function with only labor as input Output is increasing but at a decreasing rate as labor is added Diminishing returns in agriculture Malthus on supply and demand His Letter to Ricardo: “ [W] hen you reject the consideration of demand and supply in the price of commodities and refer only to the means of supply, you appear to me to look only at half of your subject. No wealth can exist unless the demand, or the estimation in which the commodity is held exceeds the cost of production: and with regard to a vast mass of commodities does not demand actually determine the cost? How is the price of corn, and the quality of the last land taken into cultivation determined but by the state of population and the demand? How is the price of metals determined?” Malthus may have been referring to two different types of markets with supply increasing with price and fixed supply --- next slide quantity Price Demand shifts change price Supply Value is changed (price) as demand shifts in both cases of supply behavior quantity Price Demand shifts change price Supply Ricardo later countered with the notion that he did indeed consider demand as a determinant of value of goods that are not reproducible – goods whose elasticity of supply is inelastic Value is changed as demand shifts on a fixed supply – non-reproducible good -- Ric