Question in MES (with P&M), p. 29

Economics Economics Questions
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1

I’ve got a question from “Man, Economy, and State with Power and Markets” on page 329.

It says: “A specific factor is one suitable to the production of only one product. A purely nonspecific factor would be one equally suited to the production of all possible products. It is clear that not all factors could be purely nonspecific, for in that case all factors would be purely interchangeable, i.e., there would be need for only one factor.”

I don’t get this.

Take two purely nonspecific factors A and B. Suppose moreover that A is required for the production of all products. Suppose also that B is required for the production of all products. (These two assumptions are important to demonstrate why I cannot understand why the above quote holds in general.)

Given these assumptions, how would you prove that we have no need for B (or no need for A)? Makes no sense to me. Can you explain please?

2

He doesn’t say that you have ‘no need’, he says that they are perfectly interchangeable and you needn’t bother thinking of them as two different factors…

It can’t be the case that some A and some B but not simply just A but more of it, or just B but more of it, are required to make a product, if A and B are perfectly interchangeable. Having some A and some B would allow for production just as ‘only more A’ and just as ‘only more B’ would.

3

That “interchangability” part is not an assumption. He deduces it from the assumptions.

Let me rephrase my question:

“It is clear that not all factors could be purely nonspecific, for in that case all factors would be purely interchangeable…”

Why exactly is this clear? Why would, “in that case”, all factors be purely interchangeable? If I can understand this, I guess I could understand the rest.

4

How would you answer this :

what would follow if all factors were purely interchangeable?

would it mean that they were all non-specific( or not)?

5

In order to analyze this, I require a precise definition of a “purely interchangeable” factor. This concept has not been defined thus far in the book. Only “interchangeable” has been defined (and it means that the actor regards two interchangeable goods as units of the same good, if I understood chapter 1 correctly). However, “purely interchangeable” has not been defined. In what ways is “purely interchangeable” different than only “interchangeable”?

6

I think in the context it means ‘functionally the same’. “oh you thought of doing C with A? You can do it with B without anything else changing…”