RE: [OPE] Constant returns to scale - IRS

From: Michael Williams <>
Date: Sat Oct 04 2008 - 15:10:06 EDT

Jerry: " What this means in practice is that mainstream economics
>can't make any sense out of real-world markets and _that_ is why firms
>don't employ these concepts in their decision- making since for firms
>these are _practical_ questions which they cannot allow marginalism to

At this level of abstraction we may well not be able to account for how capitalists think and decide; but what is being claimed is only that, subject to glitches emerging as we concretise, the systemic outcome in adequately competitive market systems will TEND to be characterised by Pi = MCi

Dr Michael Williams, BA, MSc, PhD

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-----Original Message-----
From: [] On Behalf Of Anders Ekeland
Sent: 03 October 2008 14:44
To: Outline on Political Economy mailing list
Subject: RE: [OPE] Constant returns to scale - IRS

Hi Jerry,

Well said, and let me just add I meant "optimal control problem" in a
political sense. Regarding the attitudes of Norwegian workers and
their willingness to "sacrifice" this is part of the optimisation
problem. If they (me included!) believe that a certain amount of
sacrifice is "worth it" there is certainly a willingness to sac
rfice, for example paying more for products from the South. We are
already obese, so there is certainly a margin here. If it becomes
very much more expensive to go to Spain - or to Brussels - we can
abstain from that - or use a high-speed train. Spain needs tourists.
And researchers like me would welcome a tele-conference with the
Eur.Commission instead of going to Brussels several times a year!
Saves the environment, my familiy and myself!

We would also be willing to contribute to infrastructure building,
supplying technology and know-how etc. - and possibly reducing our
own "wealth" that way. We will have to stop selling oil and gas -
selling clean hydro-electric power instead, partly by supplying clean
electricity to Europe, partly by producing solar panels by clean
power. That will double or triple the price of electric power in
Norway, but we are wasting a lot at present, we can also turn to
wind, solar, ocean-streams.

We can afford to take the lead in carbon-capture and storage... I
cannot enter into a discussion on the prospect of making CCS working
on massive scale, but given the seriousness of the problem and the
strong inertia in using fossil fuels - it would be a silver bullet if
it could be done on a massive scale (much larger than one big mega
power "pilot" plant - tens, thousands of them! But first one had to
try to get one big oil/coal/gas plant with CCS.

We could in fairly short time (5-10 years) take the extra costs of
trial and error in going from combustion engines to electric cars.

The first step would be to agree on a global tax on CO2 emissions
that really "bites" in the wealthy countries - like Norway.

But I do not think that radically reducing the living standards in
Norway is necessary. We have learned that it is technology,
infrastructure, income equality, democratic governance that realy
fosters growth! Electrification and Soviet Power - and Norway can
help the world with electrification.

So there is a lot of integrated technico-economico-socio-politico
optimisation to do!


At 14:35 03.10.2008, you wrote:
>Hi Anders, Alejandro, et al:
>Well, I think a part of the problem is the entire way in which 'competition'
>is conceived of in mainstream economic theory. Most commonly, they
>create an 'ideal' which doesn't (and can not) conform to real-world
>conditions (perfect competition) and then contrast that to other
>'market structure models' (monopoly, monopolistic competition,
>oligopoly). Among the many problems in so doing is that they take
>the *dynamic* subject of competition and try to analyze it simply
>in the realm of *comparative statics*. Where this theory most
>dramatically fails is in its inability to explain how you get from one
>market structure to another. That is, there is no explanation of how
>the dynamic process of competition *itself* brings about
>concentration and oligopolization. Mainstream theory basically
>amounts to "stuff (like oligopolies) happens" rather than a coherent
>"story" of _how_ it happens. What this means in practice is that
>mainstream economics can't make any sense out of real-world markets
>and _that_ is why firms don't employ these concepts in their decision-
>making since for firms these are _practical_ questions which they
>can not allow marginalism to fog.
> > Faced with the big questions of our time, like
> > climate change, poverty in the "South", obscene
> > income differentials in the developed countries,
> > the most important and fundamental prices would
> > be "political", high prices on fossil fuels,
> > radical change in wages in the south (up) and
> > capitalists/elites in the rich world (very much
> > down). One would use prices to solve (in a
> > continuous democratic process) and global dynamic
> > optimisation problem = creating a sustainable,
> > affluent and just economy. Prices should of
> > course be rational , i.e. signal the labour and
> > ecological costs involved, but they would have to
> > be dynamic, to get the kind of technology we need/want.
>Yes, but a precondition for the above is an awareness by
>workers that they are citizens - first and foremost - of
>the world. Easier said than done! Dealing with global
>inequalities will surely lead to conflicts in a post-capitalist
>world and I don't think it will simply be a question of increasing wages
>in the South and decreasing the wealth of the capitalists
>and elites of the North. If global equality and dealing
>with global ecological costs means a reduction of the
>standard of living of workers in Norway, do you think they
>will agree to that sacrifice?
> > This means that the separation of economics
> > and politics is artificial (as the current
> > bailout package demonstrates 110%), that
> > production and distribution policies cannot be
> > separated, that justice is an important factor in economics.
>Yes, I agree, it isn't simply a question of developing an
>'optimal' economic model which can be applied in a socialist
>In solidarity, Jerry
>ope mailing list

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