Lachmann and Postkeynesianism on prices

Aca

"In Classical economics (from Smith to Mill), the equilibrium value of prices in the long run was essentially the cost of production. With the marginalist revolution, value was held to be subjective, and prices a consequence of the marginal utilities of market participants (Lachmann 1994: 165).

Yet, with the existence of “fixprices” in many markets, it is obvious that cost of production plus the profit markup must explain how prices are set in the real world.

That nobody can sell a product for which there is no subjective demand is obviously true, but after that the subjective theory of value has its limitations."

While economic “value” defined simply as the pleasure, utility or satisfaction we derive from commodities is subjective, it is a mistake to think that prices are therefore all subjective, or just determined by subjective utilities. One has to distinguish “price theory” from “value theory,” but curiously modern neoclassical economics has largely dispensed with “value theory.”