Re: The evidence against marginal costs
Source Jim Devine
Date 11/02/27/14:15

MOST OF THE evidence against marginal cost pricing (P = MC) suggests
that firms instead use mark-up pricing over unit prime costs (variable
labor and raw materials prices). But as Kalecki pointed out back in
the 1930s, up to full capacity utilization, marginal cost and unit
prime costs are the same, so that in imperfectly competitive (i.e.,
real-world) markets, marginal cost pricing (MR = MC) is the same as
mark-up pricing over unit prime costs. As Lerner suggested, the
mark-up is much the same as the "degree of monopoly" (pricing power).

Part of the problem with NC economics is that they (implicitly) assume
Say's Law, so that situations of less than full capacity utilization
never occur.

On Sun, Feb 27, Gassler Robert wrote:
> I'd start with Lee and Keen, "The Incoherent Emperor: A Heterodox Critique of Neoclassical Microeconomic Theory," Review of Social Economy, 52(2), June 2004, pp169-199.

> For years I avoided reading critiques of neoclassical theory because they all said the same thing, and my neoclassical professor at Univ Wash, Michael Hadjimichalakis, always said it better. Then I ran across this article and now I know why I avoided the others: this article summarizes all the previous critiques in one place. By the time I finished the article, neoclassical microeconomics was lying in shreds on the floor of my office.

> Yes, they trash marginal cost.

On Sat, Feb 26, Paul Cockshott wrote:
>> Can people point me at papers reviewing the empirical support for or against the idea that marginal cost pricing really operates in capitalist industries.

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