ladybug wrote: Thanks again
Hi Ladybug It is easier to get at what Hobson is saying about the equimarginal principle if you look at his example of the painter. A painter does not chose the proportions of different colours used in the painting according to the “marginal utility” of each colour. He or she does not say: “I like the colour red more than green and will therefore continue using the colour red until the last brushstroke I apply yields the same amount of satisfaction or utility as the last brushstroke using the the colour green”. Yet this is precisely what Alfred Marshall’s famous equimarginal principle implies – that comparisons are made at the margin so that the numbers of different items in your shopping basket, for example, are adjusted in a way that ensures the last unit of each item yields the same utility as every other item. According to Marshall, by doing this we are able to maximise the total utility we obtain across the entire range of items in our shopping basket – by ensuring that the marginal unit of each item is the same for every other item. In other words, we would arrive at the most efficient allocation of our budget by conforming to this equimarginal principle and this can be demonstrated in a simple graph Hobson’s counterargument is that this is a totally bogus way of looking at things. The painter in his analogy does not apply different colours by comparing the marginal utility of each colour. Rather, allocation is made from the “centre” as he put it – that is, from a holistic perspective that looks at the painting as a unity . Try imagine what the painting would look like if the painter had a marked preference for the colour red. Most of the painting would be cololured in red so that in the case of landscape painting, say, you might end up with most of the trees being painted in red rather than green! It only appears that the painting has allocated different colours according to the equimarginal principle but this is quite misleading , argued Hobson; it is what is called a “post hoc, ergo propter hoc” (meaning, “after the fact, therefore before the fact”) fallacy. What applies to his painting analogy applies to life in general – we allocate our time and effort according to our core values – from the centre and not at the margin Another early critic of marginalisim – Nicolas Georgescu-Roegen – looked at the matter from a somewhat different perspective. He argued that the equimaginal principle was only really applicable to goods that met the same basic need – such as the need for food. Once you start attempting to apply it to consumer goods that satisfy different kinds of needs the principle breaks down completely. This is because of what he called the principle of irreducibility of needs. However , for mainstream neoclassical economics it was simply assumed that everything could be boiled down to, or rendered commensurable in terms of , the abstract notion of utility. Thus , the utility of eating a bowl of rice pudding was in principle no different from the utility of riding a horse of playing a game of golf – the only difference lying with the amount of utility each of these activities offered the individual There are numerous other criticisms that can be leveled against the whole corpus of marginalist theory. The key concept of diminishing marginal utility , for example, is highly questionable. There are many counterexamples where the exact opposite is the case such as where there is a tipping point involved. Taking a course of antibiotic pills is an example. If you stop halfway through the course the “utility” of the last pill would be significantly less than the last pill if you took all the pills prescribed. In fact the bacteria might well develop resistance and so you would incur a disutilty by not completing the course prescribed. There are other kinds of examples that defy the law of diminishing marginal utility such as Giffen goods, Status goods and Inferior goods. I wont go on about this except to draw your attention to them On your final point , yes. by ” people on the ground” I mean basically the people working in the factories or whatever – the people at the coal face so to speak – who have to make practical day to day decisions. In the face of multiple demands that exceed the supplies of the available product that is made in the factory itself. They would have to make on the spot decisions about how to allocate this product among these different demands. This is what i am getting at. My point is that for the most part, such things can be left to the basic intuition of the individuals concerned . You can certainly finetune the decisionmaking process by introducing into the equation other considerations such as frequency of demand amongst the different end uses to which this product would be allocated as well as whether or not the or how often the requirements of particular end use had been met in the pastI don’t see any real insurmountable problem with this approach, Bearing in mind we are talking about a society in which a common set of values will prevail which will tend to be reflected in a fairly consistent pattern of decision making vis a vis resource allocation. Also bear in mind that the producer-consumer distinction would no longer apply, that individuals would not necessarily just work in one particular place of work and that there would be no special vested interest in commandeering a particular input for one particular purpose at the expense of another Above all , and finally, bear in mind that this whole notion of a hierarchy of production goals only comes into play when there is a discernable discrepancy between the multiple demands for a particular good, on the one hand, and the available supply of said good on the other. The built in tendency of a socialist production system will always be towards the elimination of such bottlenecks since the existence of buffer stocks is a key indicator in the management of a self regulating system of stock control. Moreover, whenever a bottleneck might arise this does not prevent those lower priority end uses from being addressed. This is because it may well be possible in such cases to resort to technological substitution – substituting a scarce input that is mainly diverted to higher priority end uses for a more abundant input that is made available through the self regulating system of stock control. Hope this helps Cheers Robin