Re: [OPE] Asunto: US wheat market - perfectly competitive?

From: Alejandro Agafonow <>
Date: Fri Dec 17 2010 - 23:40:43 EST

The case of the wheat market is relevant as an example of non-equilibrium markets, but from a theoretical point of view aiming to provide a general theory of market imperfections, we need to understand why neoclassical economists (and Marxists working on their ground) “erroneously” postulate that in the long run the market would equalize the value of the physical marginal product to its price, reducing profits to zero.   Alternatively, most firms and economic agents may well behave like the owner of a mine, who hesitates to carry out the exploitation of the mine beyond the point of maximum average returns per unit of expenses when the expected rate of interest (which is normally the case) dictates that the net return from each ton removed in the present may be lesser than the value of the same staple removed at a minimum expense in the future. Consequently, what most firms endeavor to do is just to maximize average profit.   Most neoclassical economists reject this approach to how firms behave, but you can find a rich literature exploring this alternative among behavioral economists.  A. Agafonow ________________________________ De: Anders Ekeland <> Para: Outline on Political Economy mailing list <>; Outline on Political Economy mailing list <> Enviado: vie,17 diciembre, 2010 00:29 Asunto: Re: [OPE] Asunto: US wheat market - perfectly competitive? Hi Alejandro, I do not think there is a real-life example, but let me quote from Samuelson and Nordhaus text-book, 2010: "Adam Smith recognized that the virtues of the market mechanism are fully realized only when the checks and balances of perfect competition are present. What is meant by perfect competition? It is a technical term that refers to a market in which no firm or consumer is large enough to affect the market price. For example, the wheat market is perfectly competitive because the largest wheat farm, producing only a minuscule fraction of the world's wheat, can have no appreciable effect upon the price of wheat." (p. 35) Google "perfect competition" and wheat market - and see how wide spread the myth is. So I am looking for an article/book that refutes this myth. Regards Anders E At 14:33 16.12.2010, Alejandro Agafonow wrote: >But... What is the exasperation about...? There is no real-life >example, unless you consider the counterfactual propositions of >neoclassicals and Ian Write an answer... > >A. Agafonow > > >From: GERALD LEVY <>; >To: Outline on Political Economy mailing list <>; >Subject: Re: [OPE] US wheat market - perfectly competitive? >Sent: Thu, Dec 16, 2010 12:36:45 PM > > > > The myth is in many (most?) text-books, it even creeps > > into Stiglitz otherwise excellent "Nobel" prize lecture etc. etc. > > >Hi Anders: > >Most everything which is in one introductory economics text is in all >others! There  was a scholarly article published years ago which showed >basically that they all plagiarize each other! (Michael P would recall >the exact citation, I think, because he noted it previously). > >In any event, the reason it's in the texts is (I think) curious: if >you teach market structures, including perfect competition, then students >will ask for - and demand! - examples. I have my own way of dealing with >this: after going over the characteristics of a perfectly competitive >market, I ask _them_ for examples and tell that that whatever they suggest >I'll write on the board and we'll discuss afterwards. Then - one by one - >I'll explain to them in no uncertain terms why every single example >they gave is wrong. This will eventually lead them to ask (sometimes >with exasperation): what _is_ an example of perfect competition?  I >won't answer that question directly but it usually leads into a discussion >on the meaning of capitalist ideology. > >In solidarity, Jerry >_______________________________________________ >ope mailing list > ><> > > >_______________________________________________ >ope mailing list > > _______________________________________________ ope mailing list

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