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Comment on H. Nicholas's Paper “What is the Problem with Neoclassical Price Theory?”
Abstract
This comment shows that Walras, the central figure among the Neoclassical school founders, describes a comprehensive theory of production, capital and money; hence, Nicholas's main claims that “the Neoclassical approach has a fundamentally flawed view of the determination of commodity prices because it conceives of them as being formed in the first instance in the process of exchange abstracting, in the sense of ignoring, production and money” are not based on Walras's theory, and they are unfounded and incorrect. Nicholas accepts the erroneous method of post-Walras authors, namely, when they discuss Walras's approach, the economy is presented either through the exchange economy or through the production economy; moreover, these representations differ from his original model and are incomplete. The result is that these two different theories, post-Walras authors' theory and Walras's original theory, have been identified with each other; and these terms are used interchangeably as if they are not any different from each other.
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Notes
Marx stated, “CAPITAL—Profit (Profit of Enterprise plus Interest), Land—Ground-Rent, Labor— Wages, this is the trinitarian formula which comprises all the secrets of the social process of production.” http://www.econlib.org/library/YPDBooks/Marx/mrxCpC48.html#Part VII, Chapter 48
“Walras's ‘cash-balance’ theory of money is both valuable in itself and remarkable in the way it is integrated into his general equilibrium system” (Hutchison [1953] 1962, 209).
“In particular, the best-developed modern Walrasian general-equilibrium models cannot find room for money” (Bridel 1997).