RE: [OPE] Constant returns to scale - IRS

From: Michael Williams <>
Date: Tue Oct 07 2008 - 09:09:09 EDT

Comparative statics can be seen as an axis of abstraction. The question is not do we need it but does it help to understand the theoretical object.


Why is ‘true by definition’ necessarily a critique? Is not one of the objectives of abstraction to find out essential truisms?


More pragmatically, are you saying that demand (the willingness and ability of a consumer to pay a particular price) is in general NOT actually affected by her income?




Dr Michael Williams, BA, MSc, PhD


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From: [] On Behalf Of Gerald Levy
Sent: 07 October 2008 13:59
To: Outline on Political Economy mailing list
Subject: Re: [OPE] Constant returns to scale - IRS


Hi Michael W:


We don't really need comparative statics for this, do we?


Mainstream theory simply _defines_ demand in such a way

that if there is an increase in income (because there is an increase

in 'ability') then demand will increase (for all 'normal goods'). The

'income effect' and the 'income elasticity of demand' are

straight-forward consequences of this definition. Hence, I would

say that it is a matter of 'true by definition'.


In solidarity, Jerry




Comparative static modelling enables the abstract prediction of the movement of the system following a change in the data. This may help to focus interpretation of a dynamic model or theory. If income changes we expect a tendency for demand to shift, and so prices and quantities traded to shift. This is an insight into how markets function.

> Comparative static abstractions can help in the difficult task of interpreting dynamic models.

>> What would be an example of this?

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