Abstract
This paper refutes Rothbard’s claim that the law of diminishing marginal utility implies a non-increasing demand curve. It is argued that the law under Rothbard’s interpretation is, in fact, irrelevant for demand theory. An example of increasing demand is provided.
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Notes
… because of the law of utility, an individual demand curve must be either “vertical”, as the hypothetical price declines, or rightward-sloping (i.e. the quantity demanded, as the money price falls, must be either the same or greater), not leftward-sloping (not a lower quantity demanded)” (Rothbard 2009, p. 240). He writes further that “this is the necessary configuration of every buyer’s demand schedule (Rothbard 2009, p. 240).
However, cf. Block (2003, p. 67), who states that demand curves are downward-sloping, without mentioning the ceteris paribus clause and proclaims the law of demand as a priori true.
This ranking does not imply that two eggs are preferable to three eggs, i.e. that less is preferred to more!
For instance, when buying the second pound of butter, had the consumer already bought the first one? If so, at what price?
Reproduced from Rothbard (2009, p. 240).
In this respect the example is close to the approach of Lipsey and Rosenbluth (1971), who analyse the Giffen case within a Lancasterian framework.
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Acknowledgements
I would like to thank Jeffrey Herbener, David Lipka, Joseph Salerno, Dan Šťastný and an anonymous referee for their valuable comments on earlier drafts of this paper.
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Hudík, M. Rothbardian demand: A critique. Rev Austrian Econ 24, 311–318 (2011). https://doi.org/10.1007/s11138-011-0147-3
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DOI: https://doi.org/10.1007/s11138-011-0147-3