Re: [OPE] [1] Marxian equilibrium & reply to Wright.

alejandro_agafonow@yahoo.es

Thanks for your reply Ian.

In the example that you chose, you interpret that T (a central temperature setting) is represented in real economies for labour costs. Once specified this, I don’t want to deny (1) the causal effect that determines the trajectory of the office temperature, neither (2) to abrogate laws that control temperature changes.

What I think I am in the way to successfully refute, is the Marxists pretension that T is the origin of average temperature toward the office’s temperature spins, when actually we have had previously to decide which the appropriate temperature would be, turning to a dictator’s decision (the office’s boss), biding in the market (the auction organized by employees) or democratically voting (a ballot where each employee has one single vote). That is, the origin of average temperature toward the office’s temperature spins is determined in last resort by human preferences that would decide to which level adjust the central temperature setting. This simple statement is irreconcilable with LTV gravitational centre thesis and transformation problem.

The inappropriate use of equilibrium thesis has produced serious problems in neoclassical theory and Marxist theory. Concerning the first one, during XX century economists hoped to stop extraordinary surpluses, reached thanks to innovations and future prices anticipations, without noticing the fact that this future normative state of equilibrium that they aspired to get closer at least, imply precisely the suppression of the engine of a market economy: surpluses (in equilibrium, when prices are equal to marginal costs, producers have not motives to keep producing).

In this sense, the trial and error method of market socialists implied an extraordinary step ahead. Our “mandatory price mechanism” would let to expand resources exploitation scale at a maximum, pricing commodities to their marginal costs in the short run and safeguarding surpluses as source of motivation inside a salary system supplemented with bonuses, premiums and non pecuniary incentives.

In Marxist theory this future normative state of equilibrium needs one additional premise: that labour is the source of value. But labour time has not any link with the utility that a commodity is able to provide to consumers and you know that Karl Marx was completely conscious of this:

«There is only the following connection between the quantity of the articles available in the market and the market-value of these articles: On a given basis of labour productivity the production of a certain quantity of articles in every particular sphere of production requires a definite quantity of social labour-time; although this proportion varies in different spheres of production and has no inner relation to the usefulness of these articles or the special nature of their use-values.» (Capital, Vol. III, Marxist Internet Archive).

In consequence, LVT lacks criteria to redirect socially necessary labour toward the production of useful effects that count with consumers’ endorsement, a remark the Russian economist Boris Brutzkus originally made in his debate with Alexander Chayanov, Stanislav Strumilin y Eugen Varga, before to be exiled from USSR.

How can you state Ian that labour has the same regulative effect of a temperature setting, if labour precisely lacks the program that would show it toward which goal reorient the system? That is, labour itself can’t be a regulator as far as lacks the criterion that determines its socially necessary character. This socially necessary character only can be offered by consumer preferences –-and in the past some Marxist added the preferences of a dictator, shamefully Oskar Lange among them.

This last paragraph is the key to understand my criticism that I think you have not faced yet.

Yours respectfully,
Alejandro Agafonow

----- Mensaje original ----
De: Ian Wright <wrighti@acm.org>
Para: ope@lists.csuchico.edu
Enviado: viernes, 8 de febrero, 2008 20:34:26
Asunto: Re: [OPE] [1] Marxian equilibrium & reply to Wright.

Hi Alejandro

My response below repeats many of the points I have made in our previous
exchange.

> The Marxian thesis that labour is the source of value and determines
> prices as a last resort, rest upon a false hypothesis of equilibrium
> that would be reached when a /natural price/ is formed away from
> extraordinary economic surpluses, that some productive units are able to
> obtain thanks to innovations applied to production. This thesis sustains
> that competition let generalizes production methods till a point which
> nobody is able to obtain extraordinary profits and is in this stationary
> fictitious point where (1) prices oscillations end; (2) supply and
> demand are no more useful to explain anything, and; (3) /individual
> value/ of commodities matches their /social value/. A correlate to this
> Marxian equilibrium is that work constitutes “the gravitation centre to
> which fluctuate prices” and therefore is the labour content of
> commodities which determines as last resort prices formed in the market.
> According to Marxian thesis this fact would be demonstrated when
> reaching that stationary point referred above. But just as neoclassical
> models of equilibrium rests upon a false assumption of a well defined
> individual or social utility function, this Marxian equilibrium model
> rests upon a false assumption of a production function built of costs
> that change in a pre-established direction, while the generalization of
> production methods takes place, which goal is a state of equilibrium
> where technological change ends. Just as Marxists Ian Wright has written
> it, “deviations of prices from values are /social error signals/” (pp. 18).

- The methodological approach of abstracting from supply/demand and
technical change in order to theorize natural prices, which function as
"centres of gravitation", is not specifically Marxian but rather
Classical. So it's more accurate to additionally identify the Classical
tradition, including the modern (generally anti-LTV) long-period
equilibrium approach of the Neo-Ricardians, as targets of your critique.

- In modern terminology a "centre of gravitation" is an attractor of a
dynamical system. An attractor does not determine the dynamics of the
system "as a last resort". It explains the dynamics of the system at all
times.

- An attractor can exist, have real effects, without the trajectory of
the system ever reaching it. So the empirical fact that market prices do
not realize natural prices in no way implies that natural prices are
"fictitious" or have no explanatory role.

- Are you asserting that *if* there is no technical change and no change
in final demand *then* the market would *not* eventually realize natural
prices? If so, you are simply wrong about this; for example, the
literature contains families of cross-dual ODE models of the classical
process of gravitation that demonstrate this proposition. My own paper
demonstrates a process of gravitation in considerably more detail albeit
in the simpler setting of simple commodity production. (That my paper is
specifically concerned with the disequilibrium process of gravitation
marks it as significantly different from the Walrasian equilibrium
approach).

- Or are you saying that *empirically* this process never reaches
completion? No-one would claim otherwise. Sometimes Smith and Ricardo
write as if the process happens very quickly; Marx is more subtle. For
example, I make no claim whatsoever that my paper represents a theory
that explains the trajectory of market prices. But you can't run until
you learn how to walk.

- Changes in technique of course disrupt the real-cost structure of the
system, hence labour-values and hence the natural price attractor. A
complete theory of the dynamics of a capitalist economy must theorize
technical change.

But perhaps it will help if we talk about air-conditioning rather than
economics for a moment. Imagine a large office with a temperature
controlled by an air-conditioning system that has a central temperature
setting T. It heats and cools the rooms in an effort to maintain T.
People come and go, doors and windows open and shut, the weather changes
etc. Due to all these events at no time is the office temperature equal
to T. But at all times the office temperature tends towards T due to the
action of the air-conditioning system.

Translate your reasoning into this setting. You are denying that T
causally affects the trajectory of the office temperature.

Let's further imagine that infrequently T is changed by the intervention
of human "entrepreneurs": Bob likes it warm, Sue likes it cold, and they
independently change the dial that sets T. And consider that a group of
workers organize a futures market to bet on the office temperature.

You would interpret this fact to imply that the objective laws
controlling how temperature change are thereby abrogated and the office
temperature is entirely subjectively determined.

But both these conclusions are clearly misguided.

To get to grips with the dynamics of complex systems you need delicate
hands and advanced theoretical tools. In all seriousness a good place to
start, from a methodological point of view, is Roy Bhaskar's "A Realist
Theory of Science" (1975). His critique of "actualism" is very pertinent.

Best wishes,
-Ian.
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