An immortal fumble by Chris Auld (23-Oct-2002)

That isn't an equilibrium

> I think my intutition was correct in the context in
> which JimT was raising his point, as I understood it. If
> one takes as given a probability distribution over
> endowments, the corresponding probability distribution
> over equilibrium prices (which are found by solving
> the model) generally has a positive probability of prices
> being such that a non-trivial linear combination of
> processes will be adopted in equilibrium.
> 
> That is, IT HAPPENS FOR A SET WITH A POSITIVE
> MEASURE, where that measure defines the derived
> probability distribution in the space of factor
> prices.


This is ridiculous.  Robert picked a point not on one
of the two processes available to firms.  JimT correctly
pointed out that such an input bundle would generally not 
be chosen.  Robert frothed at the mouth, misunderstood
the programming problem he cribbed from some third source,
and insisted that it is not the case that only a lower-
dimensional subspace of price vectors could induce the
firm to find it optimal to hire such a bundle.

There is nothing stochastic in Robert's model so I don't
know where the stuff above probability distributions comes
from, but it isn't relevant and it doesn't salvage
Robert's faulty arithmetic: An individual firm in this
model either uses one and only one process, or it is
indifferent over processes.  It is only indifferent for
one price ratio in a continuum of possible price ratios,
ie, for a set of measure zero.  This ain't rocket science.

Now, of course trying to construct a model with perfect
competition and constant returns to scale leads to
indeterminant outcomes. If the economy has endowments
such that all firms using one process does not exhaust
the endowments, that isn't an equilibrium and some
fudge like an ad hoc probability distribution over 
inputs hired when firms are indifferent could be used
to acheive an equilibrium.  But Robert again confuses
an equilibrium for the economy with an equilibrium for
the firm: Once again, contra Robert, there is only one
price ratio for which the firm would ever use both
processes.


> Furthermore, if he is talking about endogeneous shifts
> in supply and demand in (short-run) temporary equilibria
> models, he is echoing a point of the Sraffian
> literature.


And in the perfectly mainstream literature, including most
introductory economics textbooks.  Robert talks as if he 
firmly believes the alpha and omega of mainstream economic 
thought is partial equilibrium models as they were understood
circa 1910.


> I don't think Chris looks good with all these stupidities
> directed at personalities.


Again, Robert now opens his "long essay" with a personal
attack, and a silly personal attack it is, a sort of 
reverse credentialism in which he insists people who
disagree with him are ignorant not because of a lack
of education, but because they are far more educated than
he himself is.  He then has the lack of self-awareness to
whine when, oddly, these people fail to treat the 973th
repost of this essay, replete with a shiny new insult,
with the utmost respect and careful consideration.


> he is trying to discredit me to avoid admitting that the
> literature upon which I draw gives perfectly valid reasons
> for thinking many introductory textbooks are misleading.


Does Robert really believe the professional literature
and the professionals who he sneers at never get beyond
"introductory textbooks?"  What on earth is his point?


> I continually point out that this line of reasoning that
> I present is hardly original to me. There are whole
> communities of contemporary economists that I am agreeing
> with.


Another of Robert's issues is he likes to restate arguments,
he restates them incorrectly, he then interprets "Robert
Vienneau is mistaken" as "the literature on which I draw is
mistaken."  Sometimes both quoted remarks are true, more
often just the first one holds.

 Fumble Index  Original post & context: ap6m2a$1p68@acs4.acs.ucalgary.ca