From: Ian Wright (iwright@GMAIL.COM)
Date: Mon May 31 2004 - 14:43:25 EDT
Hi Ajit > But these prices are determined by the determinants other > than prices. That's why it qualifies to be a theory of prices. If > they determined prices of a commodity in time t on the basis > of observed prices of the same commodity in time t-1, then it > would not be a theory of prices but rather be simple > mumbo-jumbo, which is what TSS is. Whatever the precise merits of TSS models your methodological stipulation that a theory of prices must explain prices only by reference to phenomena other than prices is unjustifiable. I can only imagine that such a stipulation derives from a static conception of reality, in which prices are conceived merely as economic outputs, rather than being both economic outputs and inputs, which have causal consequences. In any system that supports feedback mechanisms an output signal at time t can be an input to the mechanism at time t+1. This behaviour is reguarly expressed in terms of differential or difference equations. Control engineering is not formulated in terms of simultaneous equations. If your methdological stipulation was applied to other domains then the theory of control engineering would also be "mumbo-jumbo". Again, it is a kind of ascetism to maintain that prices cannot have causal consequences, but are simply output epiphenomena that have only a nominal rather than causal role. -Ian.
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