Here’s wishing the readers a happy new year. May you (and I) have a prosperous year ahead and learn more about the shell game of economists!
Good time to talk briefly about time.
Joan Robinson was perhaps the best critic of neoclassical economics and she did this by attacking the very basic concepts of mainstream theory. In her essay Time In Economic Theory (1980, Ch 7 in What Are The Questions?: And Other Essays), page 87 in Section 1: ‘Logical Time’ she says:
In a properly specified stationary state, there is no distinction between any one day and any other. On a properly specified growth path, such as a von Neumann ray, exhibiting a particular pace of expansion of employment and of a specified stock of means of production, there is no movement forward and upward or backward and downward, except the movement of the reader’s eye along the curve.
Unfortunately, the great majority of models in the textbooks are not properly specified. Take, for instance, the familiar Marshallian cross of supply and demand curves showing an equilibrium point in the middle. At a price above the equilibrium level, offer exceeds demand, and below, demand exceeds offer.
Now we are told, if price at any moment is not at the equilibrium level, it will tend toward it. This means that historical events are introduced into a timeless picture. As Professor Samuelson kindly explained to me, ‘When a mathematician says “y rises as x falls”, he is implying nothing about temporal sequences or anything different from “When x is low, y is high”.’
To move implies a temporal sequence. To fill in the story of a movement towards equilibrium, a complicated dynamic process must be specified and to specify a process that will actually reach equilibrium is by no means a simple matter.
A footnote refers to page 138 of the book – another essay quoting Samuelson:
[Samuelson]: I do not think that the real stumbling block has been the failure of a literary writer to understand that when a mathematician says, ‘y rises as x falls’, he is implying nothing about temporal sequences or anything different from ‘when x is low, y is high’.
Robinson’s response is:
My dear sir! That is my point. I really cannot allow you to get away with that.
Unfortunately, economists keep getting away from this.