On Sun, 4 Feb 2001, Rakesh Narpat Bhandari wrote: > re 4830 > > > > > > >Yes, I argue that Marx's prices of production are "long-run center of > >gravity" prices, in the sense that they are prices that equalize profit > >rates across industries as a result of the transfer of capital and that > >they are the "centers of gravity" around which actual market prices > >fluctuate. > > > Fred, > I just don't see how this works. Technical progress is uneven. In > some branches, steep depreciations in unit values are leading to an > expansion of the market and hefty increases in the mass of profit > realized. Now to the extent that capital markets are efficient (in > the Michael Jensen sense) they are disgorging capital from older > industries and channeling it to the more dynamic branches. They > (capital markets) will thus militate against the the uneveness of > technical change from disrupting the inter-industry equalisation of > profit rates. And this of course will happen more or less perfectly. > But in no sense are unit prices converging on some equilibrium state > in this process. I just don't see the justification for input prices > at t0 being equal to output prices at t1. The idea of stationary > prices is logically independent of the tendency towards the > equalisation of profit rates. > > Oh well, that's it for now. Rakesh, you seem to be interpreting Marx's concept of prices of production as is they are actual market prices from period to period. You seem to argue that, since technological change is happening all the time and at uneven rates across industries, actual input will seldom if ever be equal to output prices. From which you conclude (interpreting Marx's prices of production as actual prices) that Marx's prices of production cannot possible assume that input prices are equal to output prices. But Marx's prices of production are not actual market prices from period to period. Rather, Marx's prices of production are LONG-RUN AVERAGE PRICES over a number of prices. These long-run average prices function as "centers of gravity" around which actual market prices fluctuate from period to period, as a result of the transfer of capital between industries from period to period. These long-run average prices themselves may change. But, according to Marx, they change ONLY due to changes in the productivity of labor, either in the industries directly or involved in the production of each commodity, or elsewhere in the economy that affect the general rate of profit (which determines in part these long-run average prices). These long-run average prices do NOT change as a result of temporary imbalances between supply and demand. NOR do they change, note bene, as a result of input prices not being equal to output prices (which necessitates further changes in output prices in the following periods in order to equalize the rate of profit). Marx's prices of production change ONLY due to changes in the productivity of labor. This is why I argue that Kliman and McGlone's interpretation of Marx's "prices of production" is erroneous. According to their interpretation, "prices of production" continue to change from period to period, EVEN THOUGH THERE IS NO CHANGE IN THE PRODUCTIVITY OF LABOR ANYWHERE IN THE ECONOMY! (See for example, the 14 periods in Andrew and Ted's numerical example in their first (1988) article). But Marx said many times that his prices of production change if AND ONLY IF there is a change in the productivity of labor somewhere in the economy. These many passages are presented in my 1999 IWGVT paper, which I attached to (4830) last Sunday. Andrew and Ted's interpretation in contradicted by all these passages. So, Rakesh, your argument does not apply to Marx's prices of production, as long-run average prices. If there is technological change (i.e. a change in the productivity of labor), this will change the price of production of commodities. However, it will take some time for the actual market prices to adjust to the new long-run average prices. During this adjustment process, actual input prices will indeed not be equal to actual output prices. However, Marx's prices of production do not refer to these actual input and output prices, as they adjust to the new long-run average prices. Rather, Marx's prices of production refer to the long-run average prices themselves. In order for these long-run average prices to change only if there is a change in the productivity of labor, the input prices must be assumed to be equal to the output prices. I look forward to further discussion. Comradely, Fred
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