From: Ian Hunt (ian.hunt@FLINDERS.EDU.AU)
Date: Mon Oct 03 2005 - 19:26:27 EDT
Dear Ian, Thanks for putting the point I was trying to make but lots more thoroughly and clearly. I think joint products also point to the solution you mention, namely that conditions of production and the real wage do not on their own determine prices. Cheers, Ian >Hi Allin, > >Before talking of "beans" again, I just want to reiterate that the >problem can arise with an arbitrary number of commodities, because >the difficulty arises from the existence of self-reproducing >non-basic systems, of which there are arbitrary hierarchies (image a >stack of russian dolls). The case of a single self-reproducing >non-basic commodity, such as "beans", is a special and simple case, >used for ease of exposition. > >Plus, the lack of a clear criteria for classifying goods consumed by >workers as being "necessary", and hence basic, or part of the >"surplus", and hence potentially non-basic, means that the number of >commodities with undetermined prices is essentially arbitrary. We >cannot say that the problem only affects a small number, or even a >clearly defined number, of commodities. > >Sraffa points out that one can 'solve' the SRNB problem if one is > >willing to assume that the commodity in question fetches a price as >output that is greater than its price as input (for then its rate >of profit, which is presumed to be limited below that determined >within the basic sector, can be jacked up). This is of course >contrary to the usual Sraffian idea -- but it seems to me it's a >temporary concession. > > >Yes, but there's a twist. Sraffa wants to investigate uniform prices >and uniform profit rates. He knows that beans cannot fulfill these >conditions. So Sraffa argues that a producer of beans can fulfill >these conditions if beans are sold at a higher output price than the >input price attributed to them as means of production "in his >book-keeping". > >So in order to maintain the importance of the distinction between >basic and non-basic commodities, Sraffa is forced to consider >differentials in input and output prices for a whole class of >commodities. He tries to avoid the disequilibrium consequences by >restricting the differentials to book-keeping operations that do not >have real effects. This dodges the problem by literally "cooking the >books" in the local industry. > > >Sraffa had some early exchanges with the mathematician Newman on >this. Newman was concerned. > >Kurz & Salvadori make the following observation: "beans producers >would prefer to sell the whole harvest at the market to enter into >another business, whereas nobody can enter into the beans industry >because if somebody did, he would have to buy beans at the market >price, that is, at a higher price than the one he could attribute to >them as means of production". > >Sraffa's solution is a non-starter, and is generally recognised as such. > >The implication -- if I'm understanding this right -- is that the >price of such a commodity must rise continuously relative to the >general run of commodities. But then, surely, before long it prices >itself out of the market. Demand goes to zero and it's no longer >produced. Since it's not a basic, there are no repercussions. > > >The implication is that the Sraffian price equation is incomplete as >it stands. K&S do begin to introduce short-period demand/supply >considerations to try and work around the problem. OK, that's one >route, although the results have their own difficulties, which we >can go into. > >But I entered the Sraffian world under the impression that the >single-product Sraffian price equation determines prices once the >real wage is specified and hence was a complete theory of price that >did not need the detour to labour values. For example, a quote from >Steedman's classic critique of Marxian value theory: "... the rate >of profit is fully determined by the real wage and the available >methods of production, as are the prices of production ..." But this >is not the case, unless the methods of production specified in the >input-ouput matrix satisfy a particular mathematical condition that >lacks an economic justification. > >-Ian. -- Associate Professor Ian Hunt, Dept of Philosophy, School of Humanities, Director, Centre for Applied Philosophy, Flinders University of SA, Humanities Building, Bedford Park, SA, 5042, Ph: (08) 8201 2054 Fax: (08) 8201 2784
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