From: Ian Wright (wrighti@ACM.ORG)
Date: Fri Jun 23 2006 - 02:21:25 EDT
Hi Ajit I think if we can agree on given assumptions then we will make progress. > The 2t. of corn as raw material is a historical > datum for Sraffa, it will not change whatever you do > with the 10t; of the output. However, if I give less > or more to the workers or the capitalists from the > output, in your case that must show up in the input > otherwise your accounting system breaks down. Apply this same reasoning to technical change that occurs in the production period. Of the 10t of output, say that only 1t now need be allocated to raw materials, due to corn-saving technical change. Sraffian labour-values are a function of the technical matrix. Hence, according to your argument we must conclude that in this case Sraffa's labour-value accounting breaks down (and his price accounting to boot). My point is this: the Sraffian system in particular, and linear production theory in general, is not a dynamic theory. It abstracts from change that occurs in a production period. For example, the TSS school has complained that Sraffa's theoretical framework breaks down when we introduce technical change in the production period. Your criticism of real-cost accounting is a mirror-image: you state that real-cost accounting breaks down when we introduce a change in the distribution of real income in the production period. Both critiques are external, in the sense that they reject the assumptions of the model class. Sraffa abstracts from technical change and changes in the distribution of real income (he considers only nominal changes, and then, arguably, only in a counterfactual manner). Real-cost accounting also makes these assumptions because it derives from an immanent critique of Sraffa. However, I sympathise with both these external critiques: any realistic model of an economy must handle dynamic change. In contrast, Sraffa, and linear production theory in general, can only deliver comparative statics. For example, real-cost accounting allows comparison of two configurations of an economy with different real income distributions and different techniques. Implicit in your critique, however, is the claim that Sraffa's labour values, because they are independent of the real distribution of income, do not break down when we consider changes in the distribution of real income in the production period. But as I mentioned -- and you have yet to respond to this -- the claim begs the question. The real-cost crtique of Sraffa's labour values denies they are the correct measure of replacement costs even if we assume no changes in the distribution of real income in the production period. The validity of Sraffian labour-values in the special case of self-replacing equilibrium is precisely what is now in question. Once it is shown that Sraffian labour-cost accounting does not hold in this special case, and under-estimates replacement costs, then what rational justification is there for claiming general validity? In summary, the terms of this debate, stated at the beginning of the thread, is that we are considering a state of self-replacing equilibrium in which the surplus is distributed in real terms, abstracting from technical change and changes in the real distribution of income in the production period. This is a natural set of assumptions when reasoning about equilibrium linear production models. > What I have been trying to tell you is > that you can either have a 'closed' model, which is > represented by subsistence economy, or have a > 'surplus' model but not both. You are trying to have > both, which entails logical contradiction. You think there must be a logical contradiction because you fail to distinguish between an undistributed surplus and a distributed surplus. More on this below. > It is you who had introduced the time-scripts to > counter my point that outputs cannot be inputs to > itself. I assure you that you first introduced time-scripts. That's because, in my view, you began to shift the terms of the debate from self-replacing equilibrium to a non-equilibrium situation. > In your above statement you have again > introduced time-script. To illustrate your use of time scripts. > Your 2 tons of corn as raw material is a historical datum--logically, i.e. there > is no logical posibility of changing it after you have got your 10 tons of output out of it. > Can you say the same for your 4 tons of corn as capitalist consumption? Yes. > If you can, then it is also a historical > datum and you cannot logically change it after getting > your 10 tons of corn. Yes. (Although I hesitate to use the term "historical datum"). > Now you cannot say that > logically I cannot give more to the capitalists from > the 10 tons of corn, can you? No I cannot. > Since you cannot, then I am free to give 6 tons of corn to the capitalists and > 2 tons to the workers out of the 10 tons. Yes you are. > This cannot be logically denied. But when I do something which is > logically possible, your principle of accounting breaks down. Yes; but only in the sense that all linear production models break down if we introduce certain kinds of changes within the production period. The correct thing to do, given the absence of a dynamic theory, is to formulate a new closed model that reflects the new distribution of real income and perform a comparative static analysis; there are some examples in the paper. Allow me to repeat an earlier point in a slightly different form: This external critique that you have introduced also applies to Sraffa's labour-cost accounting. For example, if you are free to change the distribution of real income then I hope you will grant me the freedom to change the technique and introduce technical change in the production period. In which case, Sraffa's labour-cost accounting "breaks down". Do you accept the legitimacy of this external critique and do you therefore agree that Sraffa's labour-cost accounting must be rejected? But if this kind of external critique is granted then we have nothing to debate, because we have not agreed to share the same set of assumptions. For example, although I am free to introduce technical change, I don't choose to, because I have accepted the terms of Sraffa's theoretical system. I am more interested in an immanent critique and precise reasoning about well-defined theoretical objects. The merit of this approach is that reasonable people can iterate towards agreement on the properties of such theoretical objects, given that they adopt the same starting points, assumptions and rules of mathematical logic. I invite you to join me in thinking about a state of self-replacing equilibrium in which there are no changes in - technique, and - distribution of real income in the production period. We will then be able to resolve a relatively straightforward matter: whether Sraffa's labour values correctly measure replacement costs in this case. Your talk of "logical errors" and accounting systems "breaking down" is a kind of displacement activity that gets in the way of really thinking about this important point. > How do you get 4000 hours of labor when your both > moments are identical? By "moment" I meant "production period", which I think was clear from the context. The 4000 hours are applied in the production period. > The capitalist consumption is not part > of the 'methods of production' neither in the standard > or non-standard interpretation of methods of > production, except yours. My reference to "standard interpretation" was not that capitalist consumption is part of Sraffa's "method of production". I know that it is not. This is why Sraffa's labour-cost accounting is non-conservative. My reference to "standard interpretation" is that it is standard to consider that commodities are used-up and replaced within a production period. > Of course you cannot replace within the same > production period, unless you do away with the notion > of production period altogether and say that > production is instantaneous (even then I think it will > be illogical to replace input in the same > period--actualy I don't know if word 'same period' > will have any meaning). In that case, what meaning can > one attach to your 4000 hrs. of labor and that 1 ton > of corn having 1000 hrs. of labor-value. Means of production are used-up and replaced within the production period. This is a standard interpretation of a "method of production" in the single production case. I can provide quotations, but it is an elementary point. The 4t of corn of capitalist consumption on the LHS is intepreted in this standard manner: it is consumed and replaced within the production period. > And so per unit of value of corn itself is 1000 hrs. > of labor. But then you don't tell us what this 4t. of > cc does in the production process? The 4t is consumed by capitalists in the period of production. It is the real-cost of the money-capital supplied. The key point, missing in Sraffa's surplus representation of this economy, is that under capitalist conditions commodities are also produced by means of the commodity money-capital. Speaking plainly: Sraffa's PCMC excludes from consideration the very commodity that distinguishes simple commodity production from capitalist production. Sraffa's objectivism does not extend to counting the money-capital inputs in a capitalist economy. Hence, his labour-cost accounting under-estimates replacement costs. Some labour is missing. To avoid any confusion, but at the risk of repetition, the simple example of a corn economy is represented by an equation in which the technique is augmented by capitalist consumption, so the explicit representation of money-capital is absent. However, it is equivalent to a circular flow representation, in which the money-capital is present, as the full numerical example in my paper demonstrates. > If it is needed in > the production process as the 2t. of raw materials > then in economics for centuries we have been calling > it necessity of production. Then your system does not > have any surplus and it is equivalent to subsistence > economy. An economy with a distributed surplus is not a subsistence economy. Leontief, prior to the 1951 second edition of his opus, employed a closed model to study the American economy. I don't think he described the US economy as a "subsistence" economy. Sraffa did however interpret a set of homogenous equations (a closed model) as representing a subsistence economy, rather than a surplus economy in which the surplus is fully distributed. But that is a choice of interpretation, not a necessary property of the equations. Consider this: the surplus is produced. What happens to it? It gets distributed. To be evocative, workers and capitalists don't forever argue over its distribution. We can represent the distribution of the surplus in terms of a closed model. According to your terminology we can then no longer speak of this economy producing a surplus, even though the very same quantity of net product is produced. Instead of conflating an open model with undistributed surplus and a closed model with a distributed surplus you should distringuish the different ways we can think about a "surplus"; for example: > A necessity by definition is not a surplus and a surplus by definition not a necessity. In my view, this sentence neatly encapsulates a root metaphorical problem in Sraffa's system: the Sraffian surplus is forever undistributed, frozen just before the moment of its physical distribution: it can never become a necessity. But consider that today's surplus becomes tomorrow's necessity. Incomes are never only incomes -- they also become costs (cf. Marx's "moral and historical" element that enters the determination of the real wage, or Rakesh's quote of Grossman's views on capitalist consumption). Consider also, that your sentence is purely analytical. I don't think it churlish therefore to mention the "magical" term dialectics here as a contrast. I would wholeheartedly agree with your sentence if you replaced "surplus" with "undistributed surplus" or "new surplus" or "outputs that are not yet inputs". You are then talking about a process of change and an open future. How this open-ness is resolved requires a dynamic theory of the determinants of income distribution (not Sraffa's exogenously imposed wage-profit trade-off, but this is an aside). The circular flow simply assumes that the distribution of real income is a given datum. It is not a dynamic theory. I think you follow Sraffa and have one foot in and one foot out of the circular flow. Either jump out, and embrace non-equilibrium, or jump in and embrace equilibrium. But the indecision is a little agonising. Or, alternatively, propose some differential or difference equations that explain how change occurs over time. At this point the time susbscripts will make an appearance, and we can talk about changes of technique and the real distribution of income within a production period. Best wishes, -Ian.
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