Broken website code? Or just Paul Samuelson?

{d/dA} FL[L, T; A] =FLA[L/T; 1; A] < 0 (A12)
{d/dA} FT[L, T; A] = FTA[L, T; A] > – (L/T) FLA[L, T; A] > 0, from (A11)
FLA[L, T; A] > 0, FTA(L, T; A] < 0 (A13)
FLA[L, T; A] > 0, FTA(L, T; A] > 0 (A14)
FLA[L, T; A] < 0, FTA(L, T; A] < 0: not viable. (A15)
Your browser is probably fine, even though this looks like malfunctioning HTML code or something.
It’s just Paul Samuelson “disproving” Bastiat and Mises.
He continues:
That (A12) is manifestly possible makes it laughable that Ricardo or McCullough should ever have thought differently. Only ignoramuses or zealots like Bastiat or von Mises, could believe that laissez faire always makes each of us better off.
A12 shows that a new production technique can lower wages for laborers in that line of production. Some assumptions made to get there include:
  1. no money (just an output numeraire),
  2. no heterogeneity of labor,
  3. no heterogeneity of land,
  4. no substitution into producing other goods (one-sector model),
  5. no competition for laborers among different lines of production (since there’s only one sector),
  6. no time,
  7. no production time (no competition for laborers among stages of production),
  8. no interest,
  9. no produced factors of production (because that would be another sector, and because then increases in K could increase MPL, and we can’t have that), and
  10. laborers only ever get a subsistence wage (later added to show how such a new production technique like this results in people dying–we all remember the genocide that resulted from the invention of the washing machine).

Source: Paul Samuelson (1989), “Ricardo was Right!” Scandinavian Journal of Economics 91(1), pages 58-59. (emphasis mine)

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5 Comments

Filed under economics

5 responses to “Broken website code? Or just Paul Samuelson?

  1. So if we translated this into ‘human’ terms, what would we conclude? 🙂

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  2. Isn’t the task now to show which of these assumptions are essential and which are just simplifying assumptions that just make the math easier? (My guess – 9, and by extension 7 matter. The rest probably don’t.)
    Out of curiosity, does he show that adopting the new, lower wage-inducing technique is profit maximizing? If not, then he’s also assuming that the new technique is forced on the producers. If that’s the case, then I think the conclusion is unobjectionable to anyone.
    Confession: I’m not 100% convinced that what Samuelson seems to be driving at is necessarily wrong, even assuming the new technique is profit-maximizing. It’s not unimaginable to me that the average product of labor could rise while the marginal product of labor at the level of employment – which limits wages – could simultaneously fall.

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    • You’re right that his result that certain production technique developments can decrease the wages of certain laborers is possible, but his conclusion that this refutes laissez faire is absurd. He has also mischaracterized Mises and Bastiat as proponents of laissez faire. They would not have held that nobody’s wages would ever fall or that people don’t make errors in choosing a line of work that might be in trouble later on because of a newly discovered technique.

      What I’m calling out here is Samuelson’s audacity to claim Mises and Bastiat are ignoramuses because of some mathematical result based on some pretty outlandish assumptions, even relative to contemporary mainstream econ models.

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