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Andre Mouton
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"But why do only environmental economists and public finance economists talk about the case of joint products?" Because they have no recourse to the market, which rolls all of these possibilities into a single price. My interpretation: business is by nature synthetic. Goods and labor are converted into a single (intended) outcome, profit. How people cook their pork makes no difference to the farmer. Or perhaps it does - he might innovate a product that better captures their demand - but it makes no difference to the economist, who cannot know what the farmer thinks or what he might innovate or whether his innovation will succeed, but only what he has actually sold. All an impartial observer has is the price at which the transaction(s) occurred. We can talk about subdivided demand curves, or the existence of sub-particles beyond our comprehension, but the fact that a thing is possible, even probable - or for that matter, publishable - doesn't make it scientific. It must be measurable. Nor can we prove anything by watching where outputs end up. Demand is a function of intended, not actual use. Some fraction of tomatoes always gets tossed, but this doesn't mean there is demand (or a demand curve) for rotten tomatoes. Common sense tells us that these are generally bought to be eaten; statistics tells us how many are actually eaten; exit polling tells us what some people said after the fact; but we don't know anything. What you're seeing is, I think, the result of a (very justified) distinction between knowledge and inference. Perhaps regulatory bodies and central planners view the process differently. Working backward from outputs they regard as more or less desirable, they attempt to divine the proper input. But this is a moral or philosophical exercise, not an economic one, whatever terminology (and however many economists) they might employ. I suppose a taxidermist needs some knowledge of biology in order to ply his trade -- but this doesn't make him a biologist.
Toggle Commented Aug 21, 2012 on Joint outputs at Worthwhile Canadian Initiative
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Aug 21, 2012