From: Ian Wright (wrighti@ACM.ORG)
Date: Tue Jun 06 2006 - 18:45:28 EDT
Hi Paul > This is wrong, at the end of the production period the firms have > just as much working capital as they started out with. You say that > "working capital is spent on commodity inputs at the beginning > of the period", well if it is spent on commodity inputs, then > who did the firms purchase it from? Take another look at my paragraph again because you missed the qualifier "about to be converted into revenue". I did not bother to complete the description of the circuit of capital, for fear of repeating myself. This is always the danger when discussing the "beginning" and "end" of the production period in simultaneous equations models. Once the commodity capital is converted into revenue then firms, once again, have the very same working capital. However -- and this is important -- the firm revenue is transferred to capitalist accounts. A part of this revenue is simultaneously returned to firm accounts to serve as working capital. The net transfer is the profit income. We can interpret the equations to say that the working capital is at the beginning of the period and the commodity-capital is at the end of the period; or we can interpret it the other way around; or we can interpret it as a simultaneous bi-directional flow of money and goods. Ultimately this model is a simultaneous circular flow -- so you can take your pick where you want to place your marker on the roundabout. > > They purchased it from other firms, so they collectively do > not change their holdings of working money capital. Agreed, under conditions of simple reproduction. > The only possible change occurs as a weekly fluctuation of the relative > cash balances of the working and capitalist class as a result > of the weekly payment of wages, and its reflux during the week > as workers buy consumer goods. > > Moreover, the amount of money working capital is undetermined > by the equations, it depends on the velocity of circulation of > money. I think this is an interesting question and a topic for further work. There are a number of ways to go in deducing the amount of money required to circulate commodities in linear production systems. Andrew Trigg has a good discussion on this topic in his yet to be published book, "Marxian Reproduction Schema". > It seems to me that your attribution of a price to money capital > and setting this price to be r is a dimensional error, and > a conceptual slide analogous to that made by bourgeois economics > when it terms interest the price of money. r in the transformation > equations has the dimension 1/time price has the dimension > units of gold/ units of iron ( substitute other commodities in for iron). In a system without a money-commodity then "r" has dimensions $/$, i.e. it is the price of money-capital per unit of money-capital supplied. For example, if a capitalist receives a return of 0.5$ per 1$ supplied then r=0.5 $/$. In other words 1 unit of money-capital costs r$. In contrast, your suggestion that the dimension of the profit rate is "1/time" is perhaps closer to the Austrian view. Let's not talk about sliding, although the path to better knowledge is undoubtedly a slipperly slope. > This dimensional difference indicates that the r can not be a price. If there is a dimensional error in the circular flow then there is necessarily a dimensional error in Sraffa's equations. Best wishes, -Ian.
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