From: Fred Moseley (fmoseley@MTHOLYOKE.EDU)
Date: Mon Sep 17 2007 - 21:41:35 EDT
Quoting Ian Hunt <ian.hunt@FLINDERS.EDU.AU>: > Dear Fred, > I am a bit puzzled by this: the Sraffians have a model of the profit > rate per 'year', with joint products dealing with inputs that are not > entirely 'consumed' in a 'year'. The 'year' can be set as the least > turnover period of capital to deal with variations of turnover > periods, where the turnover periods are less than an astronomical > year. You then have to calculate the annual rate of profit from the > rate of profit per 'year', which involves compounding the 'yearly' > rate of profit over the no of 'years' annually, Hi Ian, thanks for your helpful response. I think that you are confirming what I have been saying about Sraffian theory, plus raising additional questions. As I understand you, all industries are assumed to have the same basic turnover period, which is equal to the least turnover period. Inputs that are not entirely consumed within this period are treated as joint products. Treating these longer lasting inputs as joint products in effect assumes that all industries have the same turnover period (the “least turnover period”), and all inputs are turned over in this period. The “joint product” method in effect turns all fixed capital into circulating capital, and assumes an equal turnover period of circulating capital in all industries. So it is not only fixed capital proper (lasts longer than the actual turnover period in each industry) that is treated as a joint product, but also circulating capital proper (consumed entirely within the actual turnover period of each industry) in all industries whose turnover period is longer than the “least turnover period”. That’s a lot of “joint products”. And what happens if the turnover period in an industry is 1.5 times as great as the “least turnover period”, or any number that is not a multiple of the “least turnover period”? The “joint product” method, which was used by Sraffa WITHIN a single industry (to convert fixed capital to circulating capital within a single industry), seems to break down when used ACROSS industries (to convert unequal turnover periods of circulating capital in all industries into the “least turnover period”). But this is not all. In all industries with turnover periods greater than the “least turnover period” (i.e. most industries), not only are the inputs not entirely consumed, but also the products are not fully produced. How does the theory deal with these incomplete products? Ian, do you think that real-world equilibrium prices are determined simultaneously at the end of each and every of these “least turnover periods” (including the equilibrium prices of the inputs as “joint products”), as this theory suggests? Wouldn’t prices be different depending on the length of the “least turnover period”? And wouldn’t prices change if the “least turnover period” changed? Is this plausible? I would argue instead, based on Marx’s theory, that real-world equilibrium prices are determined by costs plus the average rate of profit. Costs are taken as given, and the average rate of profit is determined by the labor theory of value. Costs are calculated over the actual turnover periods in each industry, not over the “least turnover period” in the economy. Thanks again. Comradely, Fred ---------------------------------------------------------------- This message was sent using IMP, the Internet Messaging Program.
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