re 4865 Fred, I think your response founders on a single slippage: it does not follow that if one allows prices of production to change interperiodically that they have been conflated with market prices! I agree with you that prices of production change only as a result of changes in the productivity of labor; this is exactly why they change interperiodically. Technical change is continuous, albeit uneven. Marx's *Capital* is a study of the impact of the forces of production on the relations of production (Mattick, Sr 1959) or in other words the effects of rising labor productivity or declining unit values on the basic economic structure of society. For this reason, Marx confines all price changes to changes in the value of commodities (Grossmann, 1929). For this reason, Marx assumes demand equals supply and the value of money remains constant; this ensures that all changes in price result from changes in value on the commodity side of the price equation. Prices of production are those prices that would prevail in any ONE period had the profit rate been equalized and demand equalled supply. They are never the actual market prices that prevail simply because the profit rate never does perfectly equalize, demand and supply are never equal, adjustment processes of the sort which you describe are underway. However, even these theoretical prices of production are changing interperiodically DUE TO THE IMPACT OF RISING LABOR PRODUCTIVITY ALONE. The theory of prices of production is meant to show that the equalisation of the profit rate does not undermine the value basis of prices; in fact it is meant to show that the the law of value regulates prices in the form of the average rate of profit (Mattick, Jr, 1981). Prices of production thus change if changes in labor productivity in the system as a whole have been sufficient to change the average rate of profit; prices of production also change directly due to continuous depreciation of commodities themselves as a result of technical change (Korsch, 1938). The former kind of change usually asserts itself in the long run; manifest changes in prices of production in the shorter term should be attributed to a decline in the unit values of the commodities themselves. Marx follows Ricardo here. But prices of production are changing interperiodically; they are not the same at t1, t3, t5, etc.. To take your example: let's say that there is a technical change in Branch A between t0 and t1. Now you argue that it will take some time for the market price to adjust to the new price of production established at t1. But in your interpretation at some point--let's say t6 and t7--the price of production of A will be equal as it settles down into its new price of production which had been established as far back as t1. But this is highly unreasonable. It now only assumes that advances in labor productivity in Branch A are not continuous orinterperiodic; it also assumes that there are no advances in labor productivity in any other branch until t7, for a change in labor productivity anywhere else would be sufficient to change prices of production all around and the price of production of A at t3, t5... Moreover, I think you have undercut the criticism of the use of linear production theory in the formalization of Marx. If the system is settling down into a state where unit input prices of production are equal to unit output prices of production, why not use the timeless technique of simultaneous equations? The superiority of Marx's theory lies in its resistance to such formalization (Mattick, Jr, 1981) Yours, Rakesh
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