From: rakeshb@stanford.edu
Date: Thu Mar 13 2003 - 02:40:53 EST
Fred writes in 8597: > > Hi Rakesh, > > You seem to misinterpret my paper. My paper does not argue that > prices of > production, as long-run center-of-gravity prices, do not change. I never said that you argue this. What I say is that you conflate two ideas; specificially you conflate the idea that as a result of the movement of market prices most sectors will not receive over the long term more or less than the average rate of profit (this could mean that short periods in which the sectoral profit is low is matched by short periods in which it is high or it could mean that over time more capital will be invested in a new sector in which the profit rate is temporarily high or vice versa) with the idea that unit market prices converge on points that remain firmly fixed over a long term by a constant and unchanging (transformed) unit value. I call the latter notion the idea of an equilibrium price,an idea which justifies the assumption of input=output prices which you do in fact share with the Sraffian framework. I argue that what Marx meant by market prices being tethered by prices of production is only the first idea, i.e., the idea that (most) sectors over the long term do make more or less than the average rate of profit. Marx's passages which you quote say nothing more. In these passages Marx never commits himself to the idea that prices of production are equilibrium, long term transformed unit values. He is not interested in equilibrium price theory, and I doubt that Ricardo is a precursor to such; Marx is only here accepting the classical notion that the profit rate will be equalized over most sectors in the long term. The notion of equilibrium prices on the other hand empties Marxian theory of the real possibility of any dynamics as Paolo Giusanni, Paul Mattick Sr, Henryk Grossmann and others have argued. I > don't > know how you get this idea from my paper. Instead, my paper argues > (and > repeated on OPEL, as Jerry indicated) that prices of production, as > long-run center-of-gravity prices, change for ONLY TWO REASONS: a > change > in the productivity of labor or a change in the real wage. It > presents > many passages in which Marx clearly stated this point. Yes of course. But the point is that the productivity of labor is changing interperiodically or daily as Ricardo himself says. > > My paper argues further that the TSS interpretation of Marx's concept > of > prices of production is not a long-run center-of-gravity price - and > is > therefore a misinterpretation - because, according to this > interpretation, > there is ANOTHER CAUSE of changes in prices of production - because > input > prices not equal to output prices. Well putting aside KM, the point remains that prices of production do change interperiodically, if not continuously, not because input prices are not equal to output prices but because the productivity of labor changes interperiodically. This is why on your own terms prices of production cannot be long-run centers of gravity. > > Below are two paragraphs from my paper. KM refers to > Kliman-McGlone. > > "However, I argue that KM's concept of "prices of production" is > not the same as Marx's concept of prices of production which we have > examined above. We have seen above that Marx's concept of prices of > production refers to long-run center-of-gravity prices around which > market > prices fluctuate from period to period. These long-run > center-of-gravity > prices may change from time to time, but they change only due to > changes > in the productivity of labor or changes in the real wage. And often does the productivity of labor change? KM's > concept of > "prices of production," on the other hand, are not long-run > center-of-gravity prices. Neither are Marx's in the equilibrium sense in which you mean them. Their "prices of production" are > short-run > prices that change from period to period. Most importantly, their > "prices > of production" change from period to period, not due to changes in > the > productivity of labor or the real wage (the productivity of labor and > the > real wage are assumed to remain constant), but rather due solely to > the > continuation of the process of equalization of profit rates from > period to > period. Yes but this seems to grant implicitly that prices of production could change from period to period because the productivity of labor is changing from period to period. Yet once this is granted, then TSS (Carchedi in particular) does have good grounds for opposing the setting of input prices equal to output prices in theorizations of the transformation or the effects of technical change. Therefore, KM's "prices of production" are fundamentally > different from Marx's prices of production." (p. 28) I am not interested in defending KM's version but rather (major aspects of) Carchedi's which you do not accept though Carchedi has prices of production for the inputs which differ from prices of production for the output for the sole reason that the productivity of labor changes interperiodically. > > "In their interpretation of "prices of production," KM assume that > the prices of inputs are not equal to the prices of outputs, i.e. > that > the prices of production of the means of production and the means of > subsistence as inputs are not equal to the prices of production of > the > means of production and the means of subsistence as outputs. > However, > this assumption is incompatible with prices of production as > long-run > center-of-gravity prices, as defined above, i.e. that change only due > to > changes of productivity or the real wage. Such long-run > center-of-gravity > prices require that the prices of inputs are equal to the prices of > outputs. It does seem to me as Allin remarked long ago that KM are only referring to a process of lagged adjustment here. Only in the process of lagged adjustment do prices of production change for reasons other than two which you have specified. In completing Marx's transformation in an equilibrium context, KM seem to take exception to Marx's theory in what seems a minor, unexceptional way If the prices of inputs were not equal to prices of outputs > (as > KM assume), then "prices of production" would necessarily continue > to > change in the next period, due solely to the continuation of the > equalization of profit rates, without changes in the productivity of > labor > or the real wage. Yes but this concedes again implicitly that prices of production could change period from period not due soley to the continuation of profit rates but due to some other factor, viz. improvements in productivity due to on-going techno-organizational change. The inequality between input prices and output > prices > implies that the prices of inputs in the next period will be > different > from the prices of inputs of the current period. If the prices of > outputs > in the next period were to remain the same as in the current period, > while > the prices of inputs in the next period change, then the rates of > profit > across industries would be unequal. Therefore, in order to equalize > profit rates, the "prices of production" of outputs in the next > period > must continue to change, even though the productivity of labor and > the > real wage remain constant. Therefore, we can see again that KM's > "prices > of production" cannot be long-run center-of-gravity prices, as > defined by > Marx." (p. 30) I do not accept that Marx defined prices of production as long run center of gravity prices, as you are defining the latter term. Yours, Rakesh > > > Comradely, > Fred > >
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