In reply to OPE-L 4206. : I expect that if you set out a full TSS system of dynamic equations of : expanded reproduction with technical change, you would have a system : which either (a) had the same transformation problem flaws as the : classic static model or (b) had more unknowns than equations. There is no flaw, no "transformation problem," even in the static case, once one heeds Marx's warning not to "go wrong" by equating the value of capital with the value of the means of production and labor-power. Lots of people, on and off this list, by no means all proponents of the TSS interpretation, will tell you that. As for counting equations and unknowns, and the "anything goes" misunderstanding in general, we have heard this often. And we've tried to clear up the misunderstanding. See especially pp. 50-51 of the paper by Ted McGlone and I in ROPE last year, which you have. (The term "anything goes" is the term we used in that paper -- I don't mean it as a comment on the debate between Rakesh and Allin.) For simplicity, assume an n-sector economy with a uniform rate of return on capital advanced, and no fixed capital or joint production. By definition, the equations relating prices and the profit rate are P[t+1] = P[t]*M*(1 + r[t,t+1]) I assume all terms are familiar. There are n equations. It may look as though there are 2n + 1 unknowns but, in a dynamic system, the n P[t] terms are givens, i.e. they are already determined or initial conditions. So actually there are only n+1 unknowns, the n P[t+1] terms and r[t,t+1]. Only 1 degree of freedom remains. This is true for Marx, it is true for numeraire theory, it is true for PK theory. It is just true. The differences among the theories boil down to the differences among their (single) closing equations. Simultaneism works slightly differently, but essentially it is a version of numeraire theory. So it just isn't true that Marx's theory, as understood by its TSS interpretation, cooks the books by having more degrees of freedom than everyone else has. Nor does the TSS interpretation dodge internal inconsistencies by invoking a perpetual disequilibrium in which "anything goes" -- note again that the profit rate in the above equations is assumed to be uniform. Rather, the TSS interpretation accurately reproduces Marx's results because its closing equation *is* the determination of value by labor-time -- assuming that the monetary expression of labor-time is constant, the increase in aggregate price (total price of output minus the total price of used-up inputs) is the monetary expression of the living labor extracted. It seems to me that the foremost empirical virtue of this principle is that it, unlike the other closing equations, predicts the deflationary or disinflationary tendency of productivity growth. Andrew Kliman
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