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Date: | Fri Dec 29 12:23:24 2006 |
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--- "Ross B. Emmett" <[log in to unmask]> wrote:
> simply assume that the range of demands on resources
exceed the resources available.<
Yes, if that applies to almost all people in all
cultures at all times and for any available
technology, which implies that desires necessarily
exceed resources no matter how much wealth or
resources exist.
Such axioms are the foundation for pure economic
theory that applies universally to human action, thus
if the premise is only for demands given today's
technology and resources, it does not serve as a
premise for pure (universal) theory.
> Also, the simplier assumption allows us to ask
questions about how economic organization in
> different cultural settings create different
> incentive structures for adjudicating the relation
between human desires and the resources available.<
The broader assumption allows us to first develop
pure, universal theory. Then we can apply it to
specific cases, such as some culture.
Given the universal concept that people respond to
incentives, then we can apply it to specific kinds of
incentives.
> are there axiomatic
> structures which are "institution free"? I doubt it.
How about the economizing premise, that people seek to
maximize benefits given some cost, or minimize costs
to obtain some benefit? (Note that it is utility that
is maximized, not necessarily money profit.) How is
that not institution-free?
Without this premise, economics collapses.
If you are saying that we need to pay more attention
to institutions, that is indeed the case.
For example, in teaching principles courses, the model
of perfect competition says that all firms are price
takers. The instructors and textbooks seldom ask how
the price can possibly change if all actors are price
takers. For that, we need to get outside the supply
and demand box to real world institutions such as
commodity exchanges (e.g. the Chicago Board of Trade).
But very few do this. Economic theory necessarily
involves institutions, but the fundamental axioms
cannot be institutional.
Fred Foldvary
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