Keen Behavioural Finance 2011 Lecture02 Marketbehaviour Part 2

In this half of the lecture, I show that even if there was a downward-sloping demand curve, Neoclassical supply and demand analysis is still invalid because:

(a) Equating marginal cost and marginal revenue doesn't maximize profits; and
(b) A market supply curve can't be derived independently of the demand curve.

Category:

Education

Tags:

• Neoclassical economics
• microeconomics
• marginal cost
• marginal revenue
• profit maximizing
• Steve Keen
• Debunking Economics
• Behavioral Economics
• Behavioral Finance
• complexity
• Emergent behavior
• Economics

[hugoheden]

I think the slide at 24:00 is confusing, as Prof Keen accepts the Stigler argument as "True". Seems to me the Stigler argument is bollocks from the start.

Stigler apparently "showed" (by introducing E and n=Q/qi) that MCi approximates P "after all" -- as number of firms (n) approaches infinity!

However, if n approaches inf. and the total amount produced (Q) is is finite, then qi approaches zero. So, every firm must produce an infinitecimal amount for the Stigler argument to hold...

Bollocks!?

[Banten]

Prediction: The neoclassical economics of the late 1900s and early 2000s will be mentioned, to future students of the philosophy of science, in the same breath as the phlogiston theory of combustion.

Thanks for making these lectures available to those of us unable to attend in person!

[Banten]

I'm glad you put up the more detailed mathematical walkthrough at the end. I've always been put off from economics by the apparent tradition in textbooks of describing expressions verbally instead of mathematically.

Perhaps that is a practice that has evolved (subconsciously?) to defend a series of logically untenable postitions.

[ApocalypticAang]

I've always known that "perfectly competitive" firms do not exist in reality (the term "perfect" is a dead giveaway)-- but I'm glad that you've proven that they don't even work (the way they "should") in a theory developed FOR them...

So I guess that the only place left for them, is in a (neoclassical economist's) dream.