Economics in the Modern World

Many economists have recognized the unequal marginal utility of money to different purchasers, and yet have clung to the opinion that the 'free market' is somehow a guarantee of maximum welfare. But it is evident that this view, if it is put forward a priori, depends on an unwarrantable identification of want with demand, whereas the economic system in fact takes no cognizance of wants unless they appear in the market in the form of effective demand. The theory, favored by Jevons and the Austrians, and by modern-day laissez-faire revivalists, that prices depend on demand conditions, which are then identified with 'utility', is doubly false. It is false because there is no necessary coincidence of utility with demand, and it is false because it assumes the independent existence of incomes apart from the productive process. Here, Cole discusses economics in the modern world.