The following is a belated response to Alan's F's
post entitled:
"When exactly is a good priced [Alan]"
{To read his post, see:
http://ricardo.ecn.wfu.edu/~cottrell/ope/archive/9511/0071.html
i.e. [OPE-L:461] (first series), dated 11/09/95.}
(This, of course, indicates that it's never too late
to respond to a post that has been archived!)
------------------------------------
At various times, reference has been made on this
list to the "law of one price" (LOOP).
In the above-mentioned post, Alan discusses a
number of issues. One of these concerns the
creation of a "uniform price" for "similar
commodities." He wrote:
"Thus, once the price is fixed, by whatever means
-- for example, if even one good trades at that price
-- then *all* similar commodities take on that price
whether or not they are sold."
To begin with, Alan has confused "similar
commodities" with *homogeneous commodities*.
What Alan is asserting would only thus hold under
other specified conditions for homogeneous
commodities. If they are only "similar commodities",
then there is no reason to expect that all
similar commodities will have a uniform price.
This is not an insignificant distinction in contemporary
markets where product differentiation has meant
that most commodities are "similar" but not
"identical" [homogeneous]. This, of course,
is related to the subject of price determination and
competitive strategy in oligopolistic markets (a
point that I made in the post that Alan was
responding to).
Note that Alan has made a strong claim above
when he writes that "even if one good trades at
that price -- then *all* similar commodities take
on that price." Indeed, it is such a strong claim
that it can be rejected if there is *only one*
instance of where this is not the case.
In what follows, I will assume for simplicity a
homogeneous product. I will also assume
competitive markets. What I will show is that
the process that Alan asserts, which assumes the
LOOP, can even under these circumstances be
violated (i.e. distorted).
Example 1: A Temporal Distortion
=========================
Consider the fishing industry. Suppose that 20
boats go out fishing out of the same port on the
same day for swordfish. Suppose, for simplicity,
that the "catch" of each boat is the same.
Alan's assertion would tell us that under these
conditions, once one swordfish in this market
sells for one price then all of the other fish
(assuming equal weight and quality) will take
on the same price -- "whether or not they are
sold".
Would this be the case in the scenario above?
Assume that one of the 20 boats arrives back
at the port and sells its catch, including the
allegedly decisive "first fish", before the other boats.
Under these circumstances, we would anticipate
that the price for the "first fish" on the market
will be greater than the price of the identical fish
sold by the other sellers. This is, of course,
because the first seller has a *temporary monopoly*
on the sale of "fresh swordfish" in this market.
Thus, in this instance, the market price is only
"set" by the first seller for the period of time that
monopoly persists. Once the other boats off-load
their catch they will discover that the market price
for their fish is *not* the market price for the first
seller. In value terms one might view this as
follows: the first seller sells her catch at a market
price that exceeds value and thereby captures a
portion of the surplus value produced by workers
in other firms in this market. Thus, there is a
rent-like mechanism that causes a redistribution
of surplus-value.
Example 2: A Spatial Distortion
=======================
Suppose again that we are still referring to the
fishing industry. In this instance, assume that
there are 15 boats that will sell their catch at
three different spatial locations. Suppose in
this case that all 15 boats arrive in the same
port at the exact same instance. According
to Alan's perspective, once the price of any 1
of the fish is set then that will set the price for all
of the same quality fish.
Now assume that 2 of the markets are located
10 miles inland whereas the remaining market
is just yards from the docks. I.e. there is a
spatial separation of parts of the same market.
We would, of course, anticipate that the market
price for the seller that is yards away from the
dock will be *lower* than the market price for
the fish sold at the other locations. This is
because the *transport cost* is greater for the
commodities that are to be sold at the further
locations. In this case again, we see that the
price is *not* fixed for all commodities of the same
type once one commodity has sold. From a value
perspective, the sellers of the commodities destined
for locations further away will have to expend more
money capital on labour-power which takes the
form of variable capital (since the workers who
transport the commodity to market are
productive of surplus value, i.e. transport represents
a continuation of the process of production in the
sphere of circulation). This means that the cost to
produce the same commodity (including transport
cost, i.e. C + V expended in transporting the
commodity to market) will be higher. We would
then anticipate that the value and market price
will be higher. Again, the LOOP is violated.
A related issue
===========
Alan wrote elsewhere in the same post that "Once
the price of a car falls, the price of all cars fall.
Ditto if it rises. This is so regardless of whether
the car actually sells."
This also is not the case. *One* reason it is not
the case is because it again ignores the spatial
dimension of markets.
E.g. suppose that the price of a car sells in
Market A in Location V falls because of conditions
particular to Location V (e.g. Location V is
experiencing a recession and with it declining
employment and demand). This would *not* then
automatically mean that the price of the same car
in Markets B - U in Locations W - Z will also
fall.
-----------------
One of the things that I find to be curious about
Alan's position is that in many of the same places,
indeed frequently the same sentences, that Marx
refers to the importance of temporal variations in
value and market price, he *also* refers to
*spatial* variations. (I am thinking here particularly
of Volume 2 of _Capital_). Thus, it would seem to
me that Alan as a temporalist should also
recognize the consequences of how capital exists
not only in time but also in space.
Relatedly, I think that spatial dimensions in political
economy have been ignored by too many Marxists.
As a consequence, it seems to me that we are not
really engaging an entire part of the literature. That
part of the literature that is not being sufficiently
engaged concerns the work of Marxist
*geographers*. A reflection of this sad state of
affairs is that not one member of OPE-L is a
geographer. This is despite an explosion of
interest in recent years among *other* Marxists.
The recent interest in geography by Marxists most
probably can be traced back to the influence of
the writings of David Harvey. Yet, there have been
many other writers such as Peet (ed. _International
Capitalism and Industrial Restructuring_),
Sheppard & Barnes (_The Capitalist Space
Economy: Geographical Analysis After Ricardo,
Marx and Sraffa_) and Webber & Rigby (_The
Golden Age Illusion: Rethinking Postwar
Capitalism_) who have engaged the perspectives
of many of those who are on this list. (For a
listing of some of the other literature see the
above and the section on "Further Reading" in
John Carney, Ray Hudson, and Jim Lewis ed.
_Regions in Crisis: New Perspectives in European
Regional Theory_.) I don't think that we have
returned the favor yet. Maybe we should do
something about that.
In Solidarity, Jerry
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