Date: 2025-08-24 Page is: DBtxt003.php txt00025616
ECONOMICS
ARGUING FOR A KEYNSIAN PRINCIPLE
The mathematics of profit maximization is incorrect by Philip George
ARGUING FOR A KEYNSIAN PRINCIPLE
The mathematics of profit maximization is incorrect by Philip George
Original article: http://www.paecon.net/PAEReview/issue99/George99.pdf
Original article: George-explaining-Keynes-25616.pdf
Peter Burgess COMMENTARY
Peter Burgess
By Philip George
Abstract
Profit maximization is one of the two main optimising principles of neoclassical economics, the other being utility maximization. In this paper we draw on Chapter 6 of John Maynard Keynes's General Theory to show that the mathematics of profit maximization is incorrect. We show, moreover, that marginal cost, a variable fundamental to neoclassical economics, cannot be calculated. We explore the implications for sticky prices, increasing returns, the shape of the supply curve, and market clearing. Finally, we argue that an important reason for the failure of neoclassical economics is that while it pays a great deal of attention to the influence of future expectations on present decisions, it completely ignores the past.