Re: [OPE-L] price of production/value

From: Ian Wright (wrighti@ACM.ORG)
Date: Sat Feb 18 2006 - 20:20:09 EST

Hi Fred

Some of my comments to Andy implicitly respond to the points you raised.

I understand better now that you are not proposing that Marx's and
Sraffa's theories are incommensurable.

> > Marx did not explicitly distinguish between equilibrium and
> > non-equilibrium states.
> I think that Marx is very clear throughtout that he is assuming
> the economy is in equilibrium and that prices of production are
> equilibrium prices.  And he clearly distinguishes between equilibrium
> prices of production and non-equilibrium market prices.
> Why do you say he is not clear on this point?

I should have written more precisely. I meant to say that Marx, in Ch.
9, Vol III, does not explicitly say whether his transformation
procedure is intended to describe the process of price formation
toward a realised general rate of profit (non-equilibrium) or the
product of this process (equilibrium). At least, when I read it, I
find I can swap between both these interpretations. It could be read
in the manner of Bortkiewicz and the neo-Ricardians, or in the manner
of, say, Shaikh and his iterative solution. Marx is not clear in ch.9
-- that much, I think, is clear. The text is a set of unfinished notes
tackling very difficult issues after all.

> > His remarks on the failure to transform
> > cost-prices are open to interpretation: and reasonable people can
> > disagree on that interpretation.
> I agree with this.  But why not accept an interpretation that makes
> Marx's theory a logically consistent whole, rather than a logically
> contradictory mess?

I am not so focussed on an interpretation of Marx, but an
understanding of LTV and capitalism. The Sraffian framework is a tool
to reason about capitalism; despite its many drawbacks it has many
advantages. It is odd that Marx's LTV breaksdown in this framework.

> First of all, I think it is completely crazy to treat fixed capital
> as a "joint product" and this nothing to do with capitalist reality.


> More to the present discussion, even though fixed capital is treated
> as a joint product, all industries have the same turnover period,
> and all exchanges take place at the same time (at the end of this
> identical period).  The only addition with fixed capital is that
> the "partially used machines" are assumed to be exchanged at the
> same time along with the regular products.

OK. Any precise theoretical model of any kind of reality, economic or
otherwise, has to make abstractions, and we can argue about whether
those abstractions are good ones, or whether they can be justified

> Would you please give the reference for Sraffa's reply.  Thanks.

Sraffa, P. Production of Commodities: a comment. The Economic Journal,
72 (1962).

> What point does Sraffa make in this reply?  That one must assume
> the reproduction of physical quantities or that one does not have to?

That one does not have to. Although, as usual, he's a bit obtuse about it.

> Does Ravagnani assume that turnover periods are the same or different?

The same I think. He also seems to think that Sraffa's theory can form
the basis for dynamics, which seems unlikely to me.

> I think I have already given several good reasons for rejecting
> simultaneous determination - that it requires identical turnover periods
> and requires that all commodities to be exchanged at the same time, and
> that it cannot deal adequately with fixed capital.

Yes, but rejecting it on grounds of "realism". But in contrast, and in
the context of the LTV, we need to reject it on the grounds that we
*expect* Marx's aggregrate equalities to *not* hold under these ideal
and simplified conditions. In general, we expect theoretical
relationships to be clearer under ideal and simplified conditions. For
example, this is the form of Andy's response: he gives some reasons
why we shouldn't expect the equalities to hold under the conditions of
the modern form of the TP, but nonetheless he finds the Sraffian
calculations/models etc. of potential interest.

> In addition, simultaneous determination assumes that the inputs enter
> production as mere physical quantities, without prices, and whose prices
> remain to be determined simultaneously with the prices of the outputs.
> But in capitalism, the inputs enter production as COMMODITIES (not as mere
> physical quantities), with ALREADY EXISTING PRICES, which are determinants
> of the prices of the commodity outputs produced.

Yes, capitalism is a dynamic system in which prices at t-1 affect the
prices at t. Simultaneous determination is a special case of this --
prices at t-1 do "affect" prices at t, but they happen to be the same
because the system is in price equilibrium. I'm not sure you can
sharply separate simultaneous determination from general dynamics in
the way that you want (at least you can't mathematically).

> I certainly agree that we can learn from each other (I certainly have),
> and that we are trying to explain the same reality (actually there may be
> some differences here - trying to explain different variables - but I
> leave that aside for now).  But it does not follow from these points that
> the conclusions of N-R theory apply to Marx's theory or to capitalist reality.

I must agree with you at this level of generality. But please see my
excuse in my reply to Andy for picking away at this old contradiction.

Best wishes,

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