Toward a more general theory of value

Harvard Now and Then

Today, Harvard is a global center for political correctness. But once upon a time, Harvard was a pioneer of pragmatism. Many people developed theories from observation, not from established dogma. Chamberlin’s 1957 book, Towards a More General Theory of Value, is such a work.

The book discussed monopoly, oligopoly, what we discussed in our value theory, discussed economies of scale, what we discussed in our production theory.

Chamberlin was keenly aware the importance of his work, which will be ‘destructive of traditional theory’. His work was discredited because of ‘the intellectual investment which both the subject of economics and particular economists have made’.

Toward a more general theory of value

Edward Hastings Chamberlin

Oxford University Press 1957

In addition to pressing forward, the essays also attempt to answer criticisms and to correct misinterpretations. Since this type of theory strikes at the roots of economist’s ‘habitual mode of thought,’ it is not surprising that it has aroused opposition. It has been rejected by some very simply on the ground that it is ‘destructive of traditional theory’ --- a rather shocking departure from the criterion by which economists usually hold that an innovation should be judged. (p. vii)

Comments: ‘destructive to the traditional theory’ is the real grudge against a good new theory.

Awareness of the revolutionary character of monopolistic competition theory has been so general that it is not necessary to argue this issue. And in view of the intellectual investment which both the subject of economics and particular economists have made in purely competitive theory it is not surprising that efforts, both conscious and unconscious, should be made to discredit such a threat to the status quo. These efforts are both intellectual and emotional, but in view of the heavy preponderance of false bases among those used to attack the theory, one is driven to the conclusion that the later predominate. (p. 13)

Comments: The book was published in 1957. Today, the investment is much more enormous on the traditional theory. The incentive and effort to discredit a new theory is much stronger.

Selling cost illustrate again how pure competition simplifies, not by approximating but by eliminating. The quantitative importance of what is left out can only be estimated. But it is necessary to mention only one such estimate, 29.5 per cent of the total value of goods sold to final buyers (in 1929), to indicate at least roughly the magnitude of what is involved. Why an item of this order --- almost one third of the total of economic activity --- be omitted from economic theory?

Comments: Today, the selling cost, as payment to Amazon.com,  is higher than 29.5%.