The following is a copy and paste of a post made by someone who frequently makes claims such as this. I was hoping someone could help me make sense of this.
Any help is greatly appreciated.
“Proofs That Many Textbooks For Economics Are Mistaken
1. Introduction
Prices are not determined by supply and demand.
I have provided mathematical proofs here before. These proofs present numerical counter-examples. I take the assumptions for so-called neoclassical economics as given. In particular, I assume constant returns to scale and diminishing marginal returns to each factor. Often you will see these assumptions presented as in production functions. My preferred discrete depiction of technology is more applied in practice. The counterexamples have properties that negate the conclusions often said to follow. For example, I have an upward-sloping labor demand curve. If the stories some economists tell were internally consistent, these accepted counter-examples could not and would not exist.
Neoclassical economists have known for decades that they cannot state their assumptions. As an example of confused balderdash, I cite George Borjas, Labor Economics. For an example of a correct textbook, I cite Kurz and Salvadori (1995). I do not know that I would call Opocher and Steedman (2015) a textbook. Woods (1990) iis a textbook. Chapters are followed by problem sets. I do not think you can find PDFs of these books. You can find Sraffa (1960).
2. An Example with Three Produced Commodities
You could check this example with a spreadsheet. Answers are given, so it can be checked with arithmetic. I outline something like a market algorithm when the wage is given. Two levels of the wage are given. (An example of supposedly educated economists being unwilling or unable to recognize results established sometime last century is here.)
3. An Example with Fixed Capital
This post works through a fixed capital example from Baldone (1974), in Studi Economici. A machine that lasts for three production cycles is an example of fixed capital. I take the interest rate as given. To check, you have to be willing to solve a linear system of four equations in four variables. (I do not go into the centre of a fixed capital system, which reduces that system to one of two equations in two variables.) This exposition asserts that firms will not produce commodities with negative prices.
4. An Example With Two Commodities
This exposition works through an example from Bruno, Burmeister & Sheshinski (1966, p. 545) in the Quarterly Journal of Economics. These are mainstream economists, and that journal, associated with Harvard, is one of the most prestigious in the world. This example has two produced commodities. The example requires you to solve two equations in two unknowns, given the interest rate (also known as the rate of accounting profits).
5. Conclusion
Many more examples like these can be produced, including with smooth production functions, rent, and so on. Empirical examples have been illustrated in the literature. I would have liked to have seen more. Innovation in actually existing capitalist economies is probably more about creating new processes and products, not the choice from an existing cookbook of recipes, as presented in production functions and the theory of supply and demand.
TL;DR: Mainstream economists agreed in the 60s of last century that what they teach is incorrect and illogical.”
Is this actually proof many mainstream economic textbooks are mistaken?
byu/Johnfromsales inAskEconomics
Posted by Johnfromsales