Paul Prentice on Food Stamps in the WSJ
Paul Prentice, writes in the WSJ‘s letters section, in response to this article:
(2) Marginal Physical Product and Average Physical Product
What is the relationship between the APP and MPP? The MPP is the amount of physical product that will be produced with the addition of one unit of a factor, other factors being given. The APP is the ratio of the total product to the total quantity of the variable factor, other factors being given. To illustrate the meanings of APP and MPP, let us consider a hypothetical case in which all units of other factors are constant, and the number of units of one factor is variable.
How Aggressive Foreign Policy Subsidizes American Nut Farmers
A friend cheekily reminds me that today is National Pecan Day and innocently suggests that I might want to “discuss the connection between pecans and the California drought.” True, enough, there’s a connection. But water is just one factor — albeit a large one — propping up the lucrative nature of farming in the California desert. International trade policy is a major subsidy for many growers as well.
7. Production: General Pricing of the Factors
1. Imputation of the Discounted Marginal Value Product
UP TO THIS POINT, WE have been investigating the rate of interest as it would be determined in the evenly rotating economy, i.e., as it always tends to be determined in the real world. Now we shall investigate the pricing of the various factors of production in the same terms, i.e., as they tend to be in the real world, and as they would be in the evenly rotating economy.
5. Time Preference, Capitalists, and Individual Money Stock
When we state that the time-preference schedules of all individuals in the society determine the interest rate and the proportion of savings to consumption, we mean all individuals, and not some sort of separate class called “capitalists.” There is a temptation, since the production structure is analyzed in terms of different classes—landowners, laborers, and capitalists—to conclude that there are three definite stratified groups of people in society corresponding to these classifications.
6. The Post-Income Demanders
Up to this point we have analyzed the time-market demand for present goods by landowners and laborers, as well as the derived demand by capitalists. This aggregate demand we may call the producers’ demand for present goods on the time market. This is the demand by those who are selling their services or the services of their owned property in the advancing of production. This demand is all pre-income demand as we have defined it; i.e., it takes place prior to the acquisition of money income from the productive system.
7. The Myth of the Importance of the Producers’ Loan Market
We have completed our analysis of the determination of the pure rate of interest as it would be in the evenly rotating economy—a rate that the market tends to approach in the real world. We have shown how it is determined by time preferences on the time market and have seen the various components of that time market. This statement will undoubtedly be extremely puzzling to many readers. Where is the producers’ loan market? This market is always the one that is stressed by writers, often to the exclusion of anything else.
8. The Joint-Stock Company
It is clear that, far from being the centrally important element, the producers’ loan market is of minor importance, and it is easy to postulate a going productive system with no such market at all. But, some may reply, this may be all very well for a primitive economy where every firm is owned by just one capitalist-investor, who invests his own savings. What happens in our modern complex economy, where savings and investment are separated, are processes engaged in by different groups of people—the former by scattered individuals, the latter by relatively few directors of firms?
9. Joint-Stock Companies and the Producers’ Loan Market
We are now ready to embark on an analysis of the effect of joint-stock companies on the producers’ loan market.
Let us take the aforementioned firm with a total capital stock and capital value of 130 ounces and owned by six stockholders. The firm earns a net income of 5 percent per year for its owners, and this is the interest rate earned by all the firms in the economy.
