Proceedings of The 13th International Conference on Modern Research in Management, Economics and Accounting
Price, Loanable Fund and Indifference Curves: Theorizing Authority through Misuse of Mathematics, Logic and Improbable Assumptions
Prof. Achyut D. Oak
Theories, Price, Loanable Fund and Indifference Curves taught and studied today in universities is purely an attempt to glorify the subject through misuse and ornamental use of mathematics and logic.
In Price theory with some arbitrary data ( quantity X, and price Y) two lines, one with positive slope and another with negative slope are drawn in the first quadrant . In the development of the theory, important factors(tastes, incomes, prices of other goods, new substitutes, availability, obsolescence etc) are totally ignored. Utility is another function which is purely a mental concept.
For Indifference Curves(ICs) assumptions are i) ICs slope downwards to the right ii) ICs are concave to the origin iii) ICs can not intersect each other iv) ICs can not meet or even touch each other. In spite of these assumptions, geometrically and physically, the measure is supposed to be ORDINAL. At no stage any mathematical equations are given .
In Loanable fund theory X is Loanable Fund and Y is Rate of Interest. Interest has been defined/ described /explained by many economists in different ways. Loanable Fund theory explains the rate of interest through the equilibrium between demand for and supply of Loanable Fund. Demand Curves ( Dis- savings, Investment and Hoarding ) and Supply Curves ( Savings, Disinvestment, Dishoarding and Bank Money ) represent these seven components only by straight lines. All these assumptions do not pass mathematical rigor and practical situations. Many important factors like time, duration, risk, productivity, taxation, market standing etc are totally ignored.
This Paper shows the anomalies seen but does not give any solution. These topics should become history and do not deserve a place in current Economics.
keywords: Economics, Indifference curves, Loanable fund, Price theory, University education.