The Wealth Effect and the Law of Demand: A Comment on Karl-Friedrich Israel-Reference-Cited by-同舟云学术

The Wealth Effect and the Law of Demand: A Comment on Karl-Friedrich Israel

Published:2020-03-21 Issue:4 Volume:22 Page:579-595
ISSN:1936-4806
Container-title:Quarterly Journal of Austrian Economics
language:en
Short-container-title:QJAE

Author:

Salerno Joseph¹

Affiliation:

1. Mises Institute

Abstract

Karl-Friedrich Israel (2018) sees “obvious tension” in a book chapter (Salerno 2018) in which I argue that the Hicksian income effect plays no role in the causal-realist approach to the demand curve. Israel’s reconstructed “wealth effect” is an effort to solve this perceived problem. This comment addresses the expositional gap in my analysis, and resolves the perceived tension. I then outline the problems with Israel’s proposed solution, which involves a wholesale reconstruction of demand theory that, in the end, implies a denial of the law of demand.

Publisher

Mises Institute

Subject

General Economics, Econometrics and Finance

Reference13 articles.

1. Alchian, Armen and William R. Allen. 1972. University Economics: Elements of Inquiry. Belmont, Calif.: Wadsworth.

2. _____. 1977. Exchange and Production: Competition, Coordination, and Control. Belmont, Calif.: Wadsworth.

3. ———. 2018. Universal Economics. Carmel, Ind.: Liberty Fund.

4. Friedman, Milton. [1949] 1953. “The Marshallian Demand Curve” in Milton Friedman, Essays in Positive Economics. Chicago: University of Chicago Press. Pp. 47–99.

5. Hayek, Friedrich A. [1937] 2008. Monetary Nationalism and International Stability. In Prices, Production and Other Works: F.A. Hayek on Money, the Business Cycle, and the Gold Standard. Ed. Joseph T. Salerno. Auburn, Ala.: Mises Institute. Pp. 331–422.