From: ajit sinha (sinha_a99@YAHOO.COM)
Date: Mon Jun 05 2006 - 10:22:41 EDT
--- Ian Wright <wrighti@ACM.ORG> wrote: > ...I don't rely on counterfactuals. If I imply that I > do then I've made a > presentational error, so my apologies if so. I'm > trying to take > Sraffa's (original) objectivism to its logical > conclusion, for example > only counting inputs and outputs at the "factory > gates" and ignoring > subjective motivations. In a state of self-replacing > equilibrium, > capitalists supply working capital for the > production period and > receive a return that they spend in the market for > consumption goods. > Such material exchanges of goods and money can be > counted. __________________________ Yes, but counting inputs and outputs at the factory gate will most likely leave you with non-equilibrium situation. Your condition that the situation must be in equilibrium introduces the notion of demand into the model, which is a subjective aspect. Secondly, you cannot argue that the observed inputs and outputs at the factory gate, which specifies your methods of production, will give you the correct price solutions in the case of the system finally adjusting to the equilibrium unless you assume constant returns to scale. Finally, if you are arguing from the perspective of 'every effect must have sufficient cause',which you appear to be doing, then you will have to specify the sufficient cause for the return to capital investment that you are simply presupposing in your model. I'll say something more about your interretation of Sraffa's objectivity later. ______________________ Ian: > ...The concept that profit is the price of > money-capital follows as a > logical necessity from Sraffa's starting point -- on > condition that > (i) we decide to model a state of self-replacing > equilibrium, and (ii) > we fully specify that state, by specifying the > physical distribution > of the net product. ___________________ But Sraffa's self-replacing state does not imply "equilibrium" in the case of a system that always produces surplus. The equilibrium condition is an extrenous condition imposed by you on Sraffa's system. I'm willing to grant you both the constant returns assumption and the equilibrium assumption if you say that an interpretation of Sraffa is not your purpose but rather you are interested in deducing certain properties of Sraffa's system under these two assumptions--that would be fair enough. I think the idea of observed methods of production and equilibrium will go together only if you assume constant returns assumption. ____________________ Ian: >... In the circular flow representation, the rate of > profits is determined > simultaneously with the distribution of real > income, including > capitalist consumption. In this representation, > there cannot be any > talk of ordering, such as "throw them back on the > input side at a > later stage". The solutions of the system of > simultaneous equations is > mutually determined all at once. _______________________ But then how come you are not short of one equation? In your system, the aggregate of the column must be equal to the right hand side of the corresponding row, which means only n-1 independent equations but you need to solve for (n-1) prices plus the rate of profits r. Since I'm not a mathematical person like yourself, I'm urging you to check for this one more time. _______________________________ Ian: >... Could you define "commodity capital"? Do you mean an > amount of money, > the "working capital" for the period of production? > Or do you mean the > actual physical input goods that are transformed by > labour into the > output? ____________________ Commodity capital is not in the form of money but in the form of commodities only. During the period of production all your inputs including commodity wages are commodity capital in the hands of the firms. After the production period the gross outputs are the commodity capital in the hands of the firms, some of this capital could be converted into revenue. _________________________ Ian: ... I think this is an misinterpretation that is unfortunately easy to make. I think the problem is that the meaning of money-capital is quite subtle. The first point to note is that there is not an additional infusion of money from capitalists into the system. Rather, the circulation of money is more complex compared to simple commodity production. There is now an additional circuit of money between firm and capitalist accounts, and a new function of money, the ability to command a return. The gross revenue held in firm accounts is transferred to capitalist accounts, the owners. __________________________ You don't know the "gross revenue" unless you know the prices. But they are not yet determined in your model. The book keeping exercise is not yet possible. The firms have gross physical outputs, and that's all you know that they have. You cannot know what is the money equivalent of this gross output (and here by money equivalent I mean its value in terms of the numeraire commodity. If you are thinking in terms of paper money then you have additional problem of specifying the values of those papers)before you have solved the system of equations. ____________________ Ian: ... You may think there is double-counting if you interpret the transfers between firms and capitalists in gross terms. But at no point is there both money-capital in capitalist accounts and working capital (or commodity-capital) in firm accounts. Rather, it's the very same "physical" money. _________________________ The only "physical" money you can have in the system is the numeraire commodity and it will circulate in the system in the manner I had explained earlier. Otherwise, you have "money" in terms of book keeping. In either case, the explanation I had given in the last mail works. _____________________ Ian: ...The subtle issue is the change in the function of money, from means of exchange in the price equations, to money that is a commodity with a price (money-capital) in the input-output matrix. ___________________ If money is a commodity, which is part of the input-output matrix, then obviously it is the numeraire commodity and its price is fixed at 1, because it is a numeraire commodity. The idea that it has another "price" which is equal to "r" is, I think, a conceptual contradiction. ________________________ Ian: This functional change of the very same physical money is dependent on the property relations that exist in the capitalist firm, sketched in 4.2. ________________________ If I understand you correctly, conceptually what you are doing is to say that "r" of Sraffa's system should be treated as cost. At certain level, this is nothing but restating Adam Smith who also insisted that proft was a necessary cost. But that should not change the accounting of Sraffa's system. I think there has to be some mistake of mathematics in your system and you are the best suited to catch it. Now I'm running out of time to write about Sraffa's 'objectivism', so I might take an opportunity to do so in the next mail. It seems you are relying on Kurz and Salvadori's interpretation of one of Sraffa's notes on the nature of surplus. I'm not sure whether you have read the whole passage, as they quote only a small part of a long piece. I have a slightly different interpretation of the passage from theirs but I'll not go into it at this stage. I hope my comments were helpful. Cheers, ajit sinha __________________________________________________ Do You Yahoo!? Tired of spam? Yahoo! Mail has the best spam protection around http://mail.yahoo.com
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