Comments and Questions

Answers to the referee 1Let me say, first of all, that I have much appreciated how the referee has summarized my paper. I will probably borrow from her/his summary to rewrite the abstract.As to the ‘complications, the existence of which should at least be acknowledged’, I will definitely do it in the revised version. In particular: • Despite the fact that, on page 3 of the manuscript, I warned the reader that “Taking a cross-sectional view of KGC around the world, it will be seen that, unfortunately, an enormous number of individuals have not yet been relieved of their ‘traditional purpose’”, I will make it clearer that not everyone is in the position of the accountant Jane, although the number of self-employed around the world is quite high. On the other hand, I am convinced that the many white collars (do they belong to the Marxian category of proletariat?) who are stuck in the position to have to accept the stress and the pressure imposed on them are more or less consciously asking themselves, on a daily basis, whether it really makes sense giving up their (potentially more pleasant) lifetime in exchange of the extra goods and services promised by their employer. • I am aware that living comfortably is a legitimate desire and that having also a couple of kids makes the monetary cost of such a comfort quite high. Moreover, insatiable wants are always around the corner to let us keep struggling with them (see footnote 3 of my paper devoted to Marshall) while leaving the weekly plan unaltered. On the other hand, the problem I raise is still there. The alternative course of action, that of undertaking longer run investment in the skills needed to explore new activities is surrounded by too much uncertainty to be considered attractive. Nevertheless, long run projects are needed by consumers no less than by firms and Governments. • I am sure that the referee admits that the question of whether my approach is neoclassical does not fall into the category of ‘the complications that should at least be acknowledged’. Therefore, I don’t think I will address it in the revised version but this is a good opportunity to clear up my mind in this respect. I agree that there is nothing wrong with being neoclassical (or Marxian) but I don’t see in what sense my three equations are neoclassical apart from their representing an attempt to model individual behavior according to some sort (new Benthamite?) of cost-benefit approach. I see why they are not: (i) they take into account that social constraints about ‘what shall I do’ (e.g. having two kids and/or having to commute every day) affect our choice about what to buy much more than our abstract preference ordering and our monetary budget constraint.; (ii) it does not assume given preferences; (iii) by no means it represents individual choices as optimal in the neoclassical sense since they are based on individuals’ perception, under radical uncertainty, of the outcomes in terms of pleasantness of the alternative courses of actions. Let me add that to the question “Why don’t people choose more leisure?” a neoclassical economist would answer: “because the opportunity cost of leisure has risen with labour productivity (and real wages)”. This is clearly very much different from my answer and there is no better proof of a dissimilarity between two theories than its different explanation of the same phenomenon. • Again, there is nothing as a given-preference assumption in my paper. Actually, it is quite the opposite. My Gossen-type approach assumes that any choice implies the immediate change of the underlying perception of pleasures and pains. In other words, choices mold preferences in Gossen’s approach, which I share. Does advertisement and marketing influence our decision about what to buy? Maybe, but this is just part of the social context in which we decide “what to do”. Let me add that Marx liked prophecies no less than Mill and Keynes, as shown in the following passage to be found in the opening pages of the German Ideology:“as long, therefore, as activity is not voluntarily, but naturally, divided, man's own deed becomes an alien power opposed to him, which enslaves him instead of being controlled by him. For as soon as the division of labour comes into being, each man has a particular, exclusive sphere of activity, which is forced upon him and from which he cannot escape. He is a hunter, a fisherman, a shepherd, or a critical critic, and must remain so if he does not want to lose his means of livelihood; whereas in communist society, where nobody has one exclusive sphere of activity but each can become accomplished in any branch he wishes, society regulates the general production and thus makes it possible for me to do one thing today and another tomorrow, to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticise after dinner, just as I have a mind, without ever becoming hunter, fisherman, shepherd or critic. This fixation of social activity, this consolidation of what we ourselves produce into a material power above us, growing out of our control, thwarting our expectations, bringing to naught our calculations, is one of the chief factors in historical development up till now." Marx and Engels 1998 [1845] p.53 (The German Ideology. Amherst, New York: Prometheus Books). I am sure that in Marx’s ideal communist society, my emphasis on the necessary investments and the three equations would have much to say, as they do for the many people around the world (including academics) who keep working day and night, struggling if not for more goods and services for fame and honor (obituary-improving activities as Hirschman once referred to them) rather than exploring path-breaking alternatives, whose outcome is uncertain.• Equilibrium is a tricky concept in economics. I am one of those dissatisfied with the traditional notion of equilibrium as a state of rest, which is clearly incompatible with the Austrian view and with the emphasis on change that my paper conveys. Nevertheless, I am convinced that imposing consistency on weekly plans is a necessary ingredient for my proposed explanation to be robust (on the other hand, the use of mathematics, much like as Marx used it, is not a necessary ingredient but just a ‘language’ allowing to test the coherence of the argument). In Lachmann’s words: “Action is guided by plans, i.e. by thought, and all action has to be interpreted as the outward manifestation of such plans, which must be coherent if they are to have a chance of success. In fact, all economic phenomena are intelligible only as the outcome of a planned action” (Lachmann 1976, p. 57). What is highly convincing of Hicks’s notion of temporary equilibrium is its non-deterministic, non-converging nature, which makes it the ideal methodological approach to match the two fundamental requisites of economic theorizing, consistency of the plans (formulated under uncertainty) and change. I am not alone (see e.g. David Glasner’s (2020) article on the The Review of Austrian Economics, “Hayek, Hicks, Radner and four equilibrium concepts: Perfect foresight, sequential, temporary, and rational expectations”) in thinking that Hicks’s method (purged of its application to Walras’s theory of market clearing prices), is perfectly in line with the Austrian view and in particular with Shackle’s emphasis on genuine choice as pathbreaking; and Shackle-type choices are always there, regardless of the possible exogenous change in data, to justify a revision of the plan and a new temporary equilibrium.