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Monthly Archives: September 2014

Walrasian system

This,is an economic system or theory that Was postulated by a political economics professor Leon walras .the system basically seeks to explain the economy based on the general equilibrium theory and marginal utility. The system is to encompass the whole field pf value and price in a much more comprehensive manner than had been presented by any previous economist . He assumed perfect competition and uniformity of price throughout the given market and mathematically demonstrated that general equilibrum in such a market requires certain conditions to be satisfied listed thus:
Each individual will have a utility curve for each good and service offered in the maket
The individual will maximise his utility through exchange and
That he will obtain the greatest possible satisfaction when the prices paid in the exchange are proportional to the mu of the good purchased.
In general he said that the basic laws which are at work bring about the equilibrum in the market. The system was exhaustive and complex as it bridged up the gap in the abalysis of the value of resources and their services. Moreso unlike the marshal and neoclassical economist which carries the phrase”other things being equal” the walrasian system sees demand and supply of a commodity to vary with changes in price. It thought all other prices at such was the most comprehensive analysis of general equilibrium. He further perfected his work with the use of mathematics especially algebra and calculus to express economic relationship as functions, derivatives and variables.
He used all the mathematical application with the intension to make economics a pure science but that not withstanding some economist like wicksell had challenged his theory.

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Posted by on September 7, 2014 in Economy with Julius

 

Sir Arthur Lewis Development Structural Model

Arthur Lewis a black from the Caribbean was born in 1915 in the island of West Indies. He finished high school at 14 and entered London school of Economics in 1932 as the first black man. He graduated with first class and had his PHD in industrial economics. He is a great writer but we shall be focusing on his contribution to development economics.
Arthur Lewis was the brain behind the famous structural model that won him the Nobel Prize in Economics. As a matter of fact he is the only black man who has won the Nobel price. He is regarded as the father of development economics.
His model was based on his paper “development with unlimited supply of labour” in 1964. He said an economy can be divided into two sectors;
Modern sector or industrial sector
Traditional sector or agricultural  sector
The model is built based on the following assumptions
Developing sector can be divided into the sectors above
Traditional sector has surplus labour supply whose marginal productivity is zero(MP=0)
The modern sector depends on the traditional sector for labour supply
The wage in the modern sector is  fixed higher compared to the traditional sector
The marginal productivity of labour in modern sector is greater than zero
Labour migrates to the modern sector because of the fixed wage and better MP
How it works
Its assumed that when the modern sector intends to expand, they draw labour from the traditional sector. They continue to draw labour supply from the traditional sector until a point regarded as the turning point is reached. The turning point is the point at which it becomes impossible to draw labour from the traditional sector. Based on this structural model it’s at this point that development is attained as its impossible to get more labour to work with the modern sector from the traditional sector without being willing to pay higher than is attainable in the traditional sector to labour with MP greater than zero

 
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Posted by on September 3, 2014 in Economy with Julius, Uncategorized