Study week on the econometric approach to development planning

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Monograph

Identifikator:: 1824422792

URN:: urn:nbn:de:zbw-retromon-217476

Document type:: Monograph

Title:: Study week on the econometric approach to development planning

Place of publication:: Amsterdam [u.a.]

Publisher:: North-Holland Publ. Co. [u.a.]

Year of publication:: 1965

Scope:: XLVII, 1259 S.; graph. Darst.

Digitisation:: 2022

Collection:: Economics Books

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Document type:: Monograph

Structure type:: Chapter

Title:: Balanced growth and technical progress in a log-linear multisectoral economy / Michio Morishima, Osaka University - Osaka - Japan

Collection:: Economics Books

562 PONTIFICIAE ACADEMIAE SCIENTIARVM SCRIPTA VARIA - 28 favourably on any development of it, provided that this develop- ment goes in the direction of a more practically relevant type of analysis, by relaxing some of the unrealistic assumptions. Now, my question is: does Professor MORISHIMA move in this direction? If I understand him correctly, I must say he does not. By considering technical change — and thus increasing per-capita ncomes — he has been compelled to introduce specific assumptions on consumers’ preferences. He has assumed that all individual utility functions, besides being « identical », are « log-linear in the quantities of the commodities consumed. » This means that, when per-capita incomes increase, each consumer — if relative prices do not change — is supposed to increase his demand for each com- modity in exactly the same proportion. These are further assumptions with respect to vON NEUMANN’S. And what is unfortunate is that these additional assumptions are not only unrealistic; they postulate a behaviour which we know to be impossible, at least among human beings. As ERNST ENGEL pointed out more than a century ago, when per-capita incomes increase, the demand for each commodity does not tend to increase proportionately; which means that utility functions are not log- linear. To postulate a consumers’ behaviour which goes against one of the strongest empirical laws of economics (ENGEL’S law) makes Professor MORISHIMA’S analysis more — instead of making it less — artificial than that of voN NEUMANN. I have been wondering why Professor MoriSHIMA has made such assumptions; and the only reason that occurs to me is that they are the only ones that allow a model with technical change to keep the mathematically elegant property of proportional economic growth. If this is the case, I must confess to be very disturbed. I feel that this is just the way in which mathematics can do economics a great disservice, For, in this direction, instead of using mathe- matics as an analytical tool for the interpretation of economic phe- nomena, we risk developing elegant mathematical models for their own sake, and then making whatever assumption may be necessary to give them an economic interpretation. 9] Movishima - pag. 34

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