Monday, January 25, 2016

Postulates of Capitalism

“Postulate” is a mathematical term.  It is defined by “The Basic Postulates & Theorems of Geometry” Web page as follows: “Postulates are statements that are assumed to be true without proof.”

Postulates of Traditional Marginalism

The first postulate, and perhaps the most important postulate of traditional marginalism, is that “The wage is equal to the marginal product of labour.” “That is,” Keynes explained, “the wage of an employed person is equal to the value which would be lost if employment were to be reduced by one unit (after deducting any other costs which this reduction of output would avoid); subject, however, to the qualification that the equality may be disturbed, in accordance with certain principles, if competition and markets are imperfect.”

The second “postulate” is that “the utility of the wage when a given volume of labour is employed is equal to the marginal disutility of that amount of employment.” It is assumed by the marginalists that no worker really wants to work at all. Performing labor for a capitalist boss is a definite “disutility” from the worker’s point of view. On the other hand, the money that the workers obtain in exchange for their “labor” enables the workers to buy commodities that have a definite utility for them. Indeed, without the “utility” provided by the wage, which the worker can only obtain by selling his or her “labor,” the worker couldn’t live at all.

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