Does Rothbard Contradict himself with regards to the Law of Diminishing Marginal Utility?

[Lilburne]

@Caplan

What is interesting is that Rothbard was unable to derive the substitution and income effects from his value scale approach. Rather, he borrowed it from the standard utility function analysis

Relevant: http://mises.org/daily/4223

@Caplan

It hardly makes sense to invoke an “all else equal” condition in cases where all else is of necessity never equal! The key neoclassical insight is that price changes ipso facto change income. Income effects do not happen at the same time as price changes by miraculous coincidence. They are inherent in the nature of price changes.

Income can still be held constant in an analysis, even with a price change, if you simply assume the price change’s concomitant income effects are negated by other equal and opposite income effects. That way you’re isolating the direct effect of a single price change on action given a single set of value scales, instead of looking at a shift from one set of value scales to an entirely NEW set that emerge from a complete revolution of the market data.

It hardly makes sense to invoke an “all
else equal” condition in cases where all else is of necessity never equal !

[BlackNumero]

Agreed. Although I still think it was in bad taste for Rothbard to include backward bending curves without explicitly mentioning this. It can be very confusing when its not explictly mentioned the ceteris paribus rule is being relaxed.