Timeline for Fundamental equations in economics
Current License: CC BY-SA 3.0
10 events
| when toggle format | what | by | license | comment | |
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| Jan 1, 2015 at 18:05 | comment | added | supercat | ...doesn't mean that it will ever be possible to convert a million units of that commodity into \$1,050,000 or even \$1,000,000. If people too-easily convert \$1,000,000 into 1,000,000 units of something, odds are good that the total liquidation value will end up being noticeably less than \$1,000,000. | |
| Jan 1, 2015 at 18:02 | comment | added | supercat | ...since in their absence the natural "solution" would simply be to have everyone get everything they could possibly desire. It is only the existence of resource limits that makes all the other compromises necessary. Also, BTW, a concept I've not seen mentioned much is that it's much easier to turn \$1 into \$0.95 than \$1.05; if it seems like everyone in some particular field is turning \$1 into \$1.05 with little effort, odds are what's really happening is they're turning \$1 into \$0.95 (or less) but making it look like \$1.05. The fact that the market price of something is \$1.05... | |
| Jan 1, 2015 at 17:55 | comment | added | supercat | If one imagines the state of an economic system as being a marble rolling over a hilly surface, the equations define grooves in which the marble will tend to roll, but the limiting inequalities define boundaries. Merely knowing the boundaries in which the marble is constrained without knowing how it will behave within them isn't very useful, but likewise a prediction of the marble's behavior which ignores the existence of a boundary between its present position and expected future position is apt to be very wrong. In a sense, though, I think the constraints are somewhat more foundational... | |
| Dec 30, 2014 at 0:38 | history | edited | jayk | CC BY-SA 3.0 |
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| Dec 30, 2014 at 0:22 | comment | added | jayk | Does my edit above get at what you're trying to express? I see this as a difference in framing of the term "fundamental". You seem to mean that physical constraints are the most fundamental element of any given economic model, with which I agree. But I see $\text{MB}=\text{MC}$ as the most fundamental element in an economists toolkit because it combines these constraints with notions of efficient use. I'm especially fond of it because it is a general equation, whereas physical constraints tend to be stated differently for different situations. | |
| Dec 30, 2014 at 0:14 | comment | added | supercat | If someone proposes a policy which, if successful, would violate one of the normal equations associated with economics, such a person should be called upon to justify the expectation that the equation would not hold in that case, but since most equations don't hold 100% of the time it would be plausible that the policy might work despite the equation suggesting otherwise. On the other hand, a policy which couldn't achieve its stated aims without violating some fundamental inequalities cannot reasonably be expected to achieve those aims; no wise person could plausibly expect otherwise. | |
| Dec 30, 2014 at 0:14 | history | edited | jayk | CC BY-SA 3.0 |
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| Dec 30, 2014 at 0:01 | comment | added | jayk | That's fair. I suppose budget constraints are also "more fundamental" in that sense. | |
| Dec 29, 2014 at 23:59 | comment | added | supercat | I would suggest that there are some inequalities which are even more fundamental than the first equation above. Unlike equations which represent approximations, some of the inequalities represent absolute. For example, the total quantity of something people will be able to afford cannot exceed the total quantity that will exist. If the number of people who would like to have something exceeds the quantity that exists, unless more of the thing are produced or some people stop wanting it, not everyone who wants one will get one, period, no matter what else is done. | |
| Nov 19, 2014 at 5:22 | history | answered | jayk | CC BY-SA 3.0 |