THE SLUTSKY MATRIX'S MYTH* E-mail

Abstract; JEL reference A12, B13, B21, D11 and D61

Key words: Compensated demand function; Consumer’s surplus; Slutsky

The neo-classic revolution of the XIXth century seventies applied the Newtonian Physics Algebra to economics and in so-doing was soon confronted with the ever-present problem of the value of money.

From these days onwards several solutions to circumvent rather than to solve the issue were devised. The utility indifference and the functional approaches are shown not to be more realistic than the original Marshallian one. The most known solution to the problem is the "Slutsky Matrix", obtained through a device called "compensated demand function".  In the present paper the compensation operation is shown - in analytic and experimental terms - to have no scientific support; the problem is restated in basic differential calculus language equating the central role of the value of money.

THE SLUTSKY MATRIX'S MYTH*



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