The name is absent

Table 1. DISTRIBUTION OF NUMBER OF LIVESTOCK BY ECONOMIC CLASS OF COM-
CERCIAL FARMERS IN GEORGIA IN 1950

To consider the impact of conspicuous produc-
tion in farm organization, it is necessary to com-
pare the equilibrium level of enterprise Xi under
profit maximization and utility maximization. This
information is provided by the optimal rate of
product transformation between Xk, any other en-
terprise, and Xi. With profit maximization, the
optimal rate of product transformation with multi-
ple products is presented in (2):⁵

<9X_i F_k Pk

where, Fj are partial derivatives of the produc-
tion function. Under the assumption of increasing
rate* of product transformation, increasing X,
would increase the rate of transformation. There-
fore, if the optimal level of Xi under utility maxi-
mization is greater than under profit maximiza-
tion, F_i∕Fk > Pi∕P_k.

The optimal rate of product transformation
between Xi and Xk can be derived from necessary
conditions for optimization. After taking the total
differential of (1), setting dU = O, and holding
other output and inputs constant, equation (3) can
be derived:⁸

<9X_k   F_i U_i + U_πP_i   P_i

(3)--=---> —

∂X_i   F_k U_7rP_k      P_k

where Fj and Uj are partial dérivâtes.

This model demonstrates that conspicuous pro-
duction of beef cows would result in larger herd
sizes than would be present under profit maxi-
mization. Equation (3) indicates that the marginal
utility of beef cows equals price times the marginal
utility of profits, plus their direct marginal utility.
In contrast, other enterprises have a marginal
utility equal to price times marginal utility of
profits. Thus, more beef cows would be expected
to be produced with utility maximization than with
profit maximization.

AN EMPIRICAL EVALUATION OF
CONSPICUOUS PRODUCTION

OF THE BEEF COWS

A behavioristic approach is adopted for the
empirical evaluation of the conspicuous production
model for beef cow production in the Georgia
Piedmont. Production possibilities for a represen-
tative firm are estimated and associated with dif-
ferent forms of utility functions. Empirical ap-
plicability of different formulations of objectives

5 Equation (2) is derived from the necessary conditions for profit maximization for a multiple product firm. Henderson and
Quandt (9, pp. 72-75) and Cohen and Cyert (4, pp. 122-128) have a formal development of this relationship.

«Equation (3) is a more general statement of the optimal rate of product transformation than (2). If the firm owner only
derives utility from profits, U₁ = O and (3) is equivalent to (2).

91

<<   <   1   2   3   4   5   6   >   >>