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Chapter 13 :red_flag: Marginalist School-Jevons, Menger, Von Wieser, Von…
Chapter 13 :red_flag: Marginalist School-Jevons, Menger, Von Wieser, Von Bohm-Bawerk, Edgeworth and Clark
John Bates Clark
He proposed that there was a permanent fund of capital which entered into a production function like any other factor
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William Jevons
Theory
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Jevons said pearls have value bcs buyers get utility from them while Ricardo said pearls have value bcs ppl need to dive for them
as more unit of X is consumed, TU increase at a diminishing rate. His law solved the water diamond paradox
Smith believed the utility has nothing to do with magnitude of exchange value bcs water is more useful whereas diamond are more valuable.
TU of water > TU of diamond, MU of diamond > MU of water
Theory Exchange
Exchange will stop until ration of marginal utilities of 2 goods a seen by trading party matches the ratio of prices
In the context of pure exchange economy, Jevons showed how this principle served as foundation for new and comprehensive theory of value.
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By combining two 'laws of exchange', every exchange must be mutually beneficial and that every portion must be exchanged at the same rate.
Labor
Literally anything that serves to put worker to work and maintain them while they produce further wealth constitutes
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Jevons defined capital as 'consisting of all useful objects which, supplying a laborer ordinary wants and desires, enable him to undertake works the results of which will be deferred for greater or lesser space of time.
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Menger, Von Wieser and Von Bohm-Bawerk
Value Theory
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Measure of value is subjective, a commodity can have great value to one individual, little to other, and no value at all to the third
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Theory of Imputation
The consumer marginal utility of commodity is governed by the marginal utility of final product that is made from the commodity
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He said it was an error to argue that good attain value bcs goods that have value to us were employed in their production
EUGEN VON BOHM-BAWERK
Theory of Interest
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Reasons for interest
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Roundabout production – the process of production is lengthened or become more roundabout when more and more capital goods are produced and used to make final products
Expectation of rising wealth – derives from the idea that we are prepared to borrow and pay interest from present rather than future consumption because we expect to have greater wealth in the future
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CARL MENGER
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eschewed all the mathematical scaffolding that characterized the works of the other two revolutionaries.
Unlike Jevons or Walras, Carl Menger founded a proper "school of thought", the Austrian School
Economist of Austrian School extended his work – von Weiser, Bawerk, von Mises, Schumpeter, Hayek.
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