Allin, thanks again for another helpful post (5154), which unfortunately I seem to have deleted by mistake. My response is below. My question is: why do Andrew's prices of production change from period to period? What is the cause of these changes in Andrew's prices of production, and how does this cause correspond to what Marx said about causes of changes in prices of production? My critique of Andrew's prices of production can be summarized in two main points: 1. Marx said that prices of production change only to changes of the productivity of labor. Andrew's prices of production change every period, even though there is no change of productivity, either in the current period, or in recent past periods. Andrew has agreed that in his published papers he assumes simple reproduction and constant productivity. Therefore, the causes of the changes in Andrew's prices of production must be something other than changes in productivity. But Marx said that changes in productivity is the only cause of changes in prices of production. Allin, isn't this contradiction a problem for Andrew's interpretation? Doesn't this contradiction imply that Andrew's interpretation of Marx's prices of production is a misinterpretation? Marx's prices of production change only if there is a change of productivity and Andrew's prices of production change even if there is no change of productivity. 2. A close examination of Andrew's numerical examples reveals that the cause of changes in Andrew's prices of production is that HE ASSUMES THAT INPUT PRICES ARE NOT EQUAL TO OUTPUT PRICES. This assumption requires that output prices (i.e. prices of production) continue to change in subsequent periods, in order to continue to equalize rates of profit across industries. I will elaborate on this point below. In Marx's discussions of causes of changes in prices of production, nothing is ever said about input prices not equal to output prices as a possible cause. Indeed, quite to contrary, Marx stated many times that he assumed that constant capital is valued in current reproduction costs, i.e. that input prices are equal to output prices (as I have documented). If this second criticism (to be elaborated below) is correct, isn't this another problem for Andrew's interpretation? Andrew's prices of production change due to input prices not equal to output prices. There is nothing like this in Marx's texts. Marx said that prices of production change only due to changes of productivity. Doesn't this contradiction also imply that Andrew's interpretation of Marx's prices of production is a misinterpretation? 3. In order to elaborate the second point above - that Andrew's prices of production change from period to period because he assumes that input prices are not equal to output prices - I will briefly review the relevant aspects of the numerical example in Andrew and Ted's original (1988) article. Andrew and Ted's paper presents an interpretation of the transformation of values into prices of production, which is illustrated with a numerical example with 14 periods. The inputs in period 1 are assumed to be equal to the values of the MP and MS. The output prices in period 1 are "prices of production," which are determined by the equalization of profit rates across industries. These output prices in period 1 are different from the input prices in period 1 (which are equal to values); i.e. (1) OP(1) not = IP(1) Andrew and Ted argue that this is essentially what Marx did in Part 2 of Volume 3 of Capital; i.e. that Marx himself assumed that the inputs are purchased at prices equal to values and did not transform the input prices into prices of production. This was sufficient for Marx's purposes, which was to explain the transformation of output prices. Andrew and Ted claim to supplement Marx by continuing Marx's analysis into subsequent periods, in order to show the transformation of input prices, in addition to the transformation of output prices presented by Marx. The input prices in period 2 are assumed to be equal to the output prices of period 1; i.e. (2) IP(2) = OP(1) >From (1) and (2), it follows that the input prices of period 2 will not be equal to the input prices of period 1; i.e. (3) IP(2) not = IP(1) In other words, because input prices were not equal to output prices in period 1, input prices change from period 1 to period 2. Finally, since input prices change in period 2, output prices in period 2 - the "prices of production" of period 2 - must also change, in order to continue to equalize profit rates across industries; i.e. (4) OP(2) not = OP(1) Similar changes continue to occur in subsequent periods. Because input prices are not equal to output prices in a given period, input prices change in the next period, and hence also the output prices - the "prices of production" - of the next period will also change, in order to equalize rates of profit. Thus we can see that Andrew and Ted's "prices of production" change from period to period, even though there is no change in productivity, because they assume that input prices are not equal to output prices. Further evidence of this conclusion is provided by the end of Andrew and Ted's numerical example - periods 13 and 14. By period 13, the input prices have converged to output prices. Since input prices are now equal to output prices in period 13, the input prices in period 14 no longer change, and are equal to the input prices in period 13. Since the input prices in period 14 no longer change, neither do the output prices in period 14 - the "prices of production". The output prices in period 14 are equal to the output prices in period 13, because input prices in period 13 were equal to output prices in period 13. These final output prices will not change any further, unless there is a change of productivity. Thus we see again that the reason why output prices changed in previous periods were that input prices were not equal to output prices. Once input prices become equal to output prices, then output prices cease to change in subsequent periods. 4. I argue that there is never a hint in any of Marx's discussions of causes of changes in prices of production, that one such cause could be that input prices are not equal to output prices (or the same point in different language). Indeed, Marx stated many times the opposite assumption - that constant capital is valued in current reproduction costs, or that input prices are equal to output prices. This is why I argue that Andrew and Ted's interpretation of prices of production is a misinterpretation. Andrew and Ted's prices of production are short-run prices, that change even though there is no change in productivity (because input prices are not equal to output prices). Marx's prices of production, on the other hand, are long-run prices, that change only if there is a change of productivity. Andrew and Ted's final output prices at the end of the transformation process (in period 14), that change only if there is a change of productivity, are similar to what Marx meant by prices of production. But the output prices in earlier periods, that change even though there is no change of productivity, are definitely not what Marx meant by prices of production. I look forward to further discussion. Comradely, Fred
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