Neoclassical Economic Theory, 1870 to 1930
Warren J. Samuels Each book in this series explores the present status of its field in terms of where it is, how it got there, the existing tensions within the field, and something of how the field might develop in the future. Each book presumes that work
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Recent Economic Thought Series
Editor: Warren J. Samuels Michigan State University East Lansing, Michigan, U.S.A.
Previously published books in the series: 1.
2.
3. 4.
5. 6. 7. 8. 9. 10. 11. 12. 13.
14. 15. 16. 17. 18. 19. 20.
Feiwel, G.: Samuelson and Neoclassical Economics Wade, L.: Political Economy: Modern Views Zimbalist, A.: Comparative Economic Systems: Recent Views Darity, W.: Labor Economics: Modern Views Jarsulic, M.: Money and Macro Policy Samuelson, L.: Microeconomic Theory Bromley, D.: Natural Resource Economics: Policy Problems and Contemporary Analysis Mirowski, P.: The Reconstruction of Economic Theory Field, A.: The Future of Economic History Lowry, S.: Pre-Classical Economic Thought Officer, L.: International Economics Asimakopulos, A.: Theories of Income Distribution Earl, P.: Psychological Economics: Development, Tensions, Prospects Thweatt, W.: Classical Political Economy Peterson, W.: Market Power and The Economy DeGregori, T.: Development Economics Nowotny, K.: Public Utility Regulation Horowitz, I.: Decision Theory Mercuro, N.: Law and Economics Hennings, K. and Samuels, W.: Neoclassical Economic Theory, 1870 to 1930
Neoclassical Economic Theory, 1870 to 1930
edited by Klaus Hennings and Warren J. Samuels
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Kluwer Academic Publishers Boston I Dordrecht / London
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0istrIM0rs lor all 0Iher eoo.ntrIes: KlUwer ~mk: Publishers Group 0is1rlbution Cerary 01 Congress c.taIoging ......P\rIlIication Os1a NaocIassIcIII eoonomic meory, 1870_ 1930/K ....... Hennings and Warren J, SMnuela, edftonI, p. cm._(Reoonl economiclhooghl)
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ISBN·ll: 976·94"{)10·7~ 77·l e-ISBN-ll : 976-94-009-2161-11 DOl: 10.1007/976-9OOI olooco""""ca. I. Hennings, KlaUS. II. Samuels, WarrenJ., 1933III. Sarles. HB98.2.N43 1990 33O.1S'7-dc20 89·15520
Copyright 01990 by lOuwer Academic; Publishers Soltcover r eprint of the hardcover 1st edition 1990
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(1)
From profit maximization it follows that the real wage rate (w) must be equal to the present value of the discounted product per unit of labor using instantaneously compounded interest (p): (2)
The entrepreneurs, facing a given real wage, choose t so as to maximize p, the rate of return, which implies: p
= f(t)/J(t).
(3)
This is Jevons' formula for the rate of interest: "the rate of increase of the produce divided by the whole produce" (LPE 1, p. 178). The value of the stock of capital, i.e., timber of all ages, will be: K = Nw J~ ePX dx = (Q - Nw)/p.
(4)
If K and N are given, then the system of equations give solutions for Q, p, w, t. Wicksell then differentiated Q with respect to K which gives:
dQldK = p
+
(K - Nwt) dp/dK.
(5)
The parenthesis is positive, since K > Nwt if p > 0 and dp/dKis negative, which implies that dQldK < p. Hence, the marginal productivity of capital is always less then the rate of interest, which "proves t
