[OPE-L:7408] [OPE-L:942] Re: Re: Marx's Concept of Prices of Production
Ajit Sinha (sinha@cdedse.ernet.in)
04 May 99 12:24:52 IST (+0530)
>John Ernst wrote:
>
> This is a response to Fred's OPEL 938.
>
> Fred wrote:
>
> In my Boston paper (and summarized in recent OPEL posts), I
> reviewed=20
> all of Marx's published writings on his concept of price of
> production,=20
> and concluded that Marx consistently defined his concept of price
> of=20
> production as a long-run equilibrium price, in the precise sense
> that pri=
> ces=20
> of production have the following four characteristics:=20
>
> 1. RATES OF PROFIT ARE ASSUMED TO BE EQUAL=20
> as a long-run tendency, not as an actual fact in every
> period
>
> 2. SUPPLY AND DEMAND ARE ASSUMED TO BE EQUAL=20
> again, as a long-run tendency
>
> 3. FUNCTION AS LONG-RUN "CENTER OF GRAVITY" PRICES,
> around which actual market prices fluctuate from period
> to period,
> due to supply and demand. In other words, prices of
> production=20
> are long-run average prices, not the actual prices of any
> given period.
>
> 4. CHANGE IF AND ONLY IF:
> a. the productivity of labor changes
> b. the real wage changes.
>
> John's Comments:
> On Point 1. Here we have to question Marx, do we not? If
> capitalists are maximizing the RRI and not the rate of profit,
> why there would be any tendency for the rates of profit to
> equalize is unclear. Again, Marx like the political
> economists of the 19th Century was clearly mistaken.
________________
John, the rate of profit for the whole system is embedded in the
system itself. It is a non-price phenomenon. It has nothing to do
with an individual capitalist's desire to maximize or minimize
his/her rate of return etc. As long as the technology of
production, real wages and total output are given, there is no
where else for the rate of profit to go then the Sraffian rate of
profit. The point is that the physical surplus is already embedded
in the system, and the rate of profit is nothing but the ratio of
surplus to means of prodution (including wages, if you like) used
up in prodution. If the surplus is not distributed to the
capitalists on the basis of equal return on investment, then some
argument must be produced why its distribution should not be equal.
However, no amount of unequal distribution of the surplus can
change the rate of profit for the whole system. I think one needs
to be clear that the question a capitalist may be interested in is
entirely different from the question a political economist may be
interested in. Imposition the problems and concerns of individual
capitalists on to the theory of political economy, in my opinion,
creates a lot of confusion.
______
> John:
>But let's deal with another issue here and now. What is
the "long-run"? Is there technical change in this "long-
run"? If not, why not? Given the use of the term
"long-run" -- in modern economics its unclear what the term
means in the Marxian context.
______________
Sraffians usually use the term "long term" rather than "long run"
to distinguish thir concept from Marshallian "long run". "long
term" is long enough time to allow for capital movements across
industries in response to differential rates of profit. But these
"long term" prices can be determined independently of the
adjustment process, that is why the properties of the system can be
analyzed independently of the process that brings the system to
equilibrium.
_________
John:
>3. I'm as confused by "long-run 'center of gravity' prices" as I
am by "long-run average prices." Are these average prices
computed using prices of production in various periods? As
we compute this average is technical change taking place?
____________
I think "average" is a poor choice of word in this context (I
myself have used 'average profit' on one occasion in print I think,
and I regret that) Prices of prodution is not some kind of
statistical average derived from a bunch of observed 'market
prices'. The gravitational point is determined independently of
'market prices', as in the case of pendulum--its gravitational
point
is determined independently of the position of the pendulum at any
given time. Cheers, ajit sinha