[OPE-L:3035] RE: Okishio 5 of 4

Alan Freeman (A.Freeman@greenwich.ac.uk)
Mon, 16 Sep 1996 17:30:03 -0700 (PDT)

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Andrew writes:
==============

There's another "constraint" that I think needs to be
"imposed" for the profit rate to differ *systematically*
from Okishio's if productivity rises monotonically: the
determination of value by labor-time. I'm not sure whether
Alan disagrees or whether this "constraint" was implicit in
what he was saying.

In case it *was* implicit, I think it needs to be stated
explicitly :) before folks start scribbling down models.

"Productivity" also should be defined more clearly before
people start scribbling.

============================================================

Alan responds:

Nope, I'd like them to start scribbling first.

I think the discussion would advance further if sceptics
took that apparently tiny but in fact giant step of
dynamising their *own* assumptions, than if these
assumptions were supplied by us. I think that is ultimately
the only way that mutual understanding will improve. It's
not my purpose to impose assumptions. I prefer to persuade
people to face the full consequences of the assumptions they
already have. That's what I think most people are avoiding.

I would be *more* happy to be proved wrong, and know that
even one sceptic had *actually written down* a dynamic
system, than if I was proved right.

The main problem we face is not a great superfluity of
dynamic results different from ours. Have you seen a dynamic
system that confirms Okishio? Even a Post-Keynesian or,
believe it or not, even an *Austrian* one? Can't say that I
have. No, the problem is critics who refuse to consider
dynamic systems at all. They deny, in effect, the legitimacy
of the question 'how does the economy move from one period
to the next'?

How many answers can one discuss with critics who refuse the
questions? It's like being Galileo without a telescope.

As long as we're stuck on that particular groove in that
particular record, there is IMO no hope of progress in
anything else including Marx's Marxism.

I'm prepared to give up any argument about which assumptions
are correct, in order to make that huge small step. I think
*after* that step has been made, *then* we can discuss
assumptions in the same language. At present we're using the
same words, but we sure as hell aren't discussing the same
thing.

I grudgingly concede about productivity. In the context of
an assessment of Okishio's theorem I will define it as does
Okishio; rising productivity means that the input of each
good required to produce each other good, is no greater in
each period than in the preceding period. I think my
conjecture also probably holds, however, under Okishio's
alternative 'cost' criterion, that the unit cost of inputs
should be no greater under the new technology at old prices.
Frankly if someone comes up with a dynamic model that turns
out to violate both these I think it would be more
interesting to discuss it than rule it out of court. But I
agree it is not covered by the conjecture.

My gut feeling is that the conjecture doesn't depend on the
determination of value by labor-time. I'm also pretty sure
that for all the cases discussed so far on OPE, it holds
independent of the way prices are determined.

This is the precise conjecture: under either rising
productivity or falling cost as defined by Okishio, under
any behavioural assumption concerning distribution,
investment behaviour or the outcome of competition, starting
from the same initial conditions and applying the same
assumptions, the profit rate will be systematically lower
for the dynamic solution than for the comparative static
solution, under the constraints I propose.

To repeat, my *only* constraints are the laws of physics
(conservation of matter, pace Mike Williams) and the money
received for the sale of goods should be the same as the
money paid for their purchase.

This, I think, is independent of the determination of value
by labor-time. Indeed, I think it is probably independent of
the relation of value to price. This conjecture, like
Okishio, refers to prices. That's why the issue is IMO so
hard for a simultaneist treatment to avoid. I want simple
answers to a simple question: how does an economy actually
*get* from one Okishio state to another?

Make my day: prove me wrong.

Alan

Oh, of course Andrew is excluded from this competition.

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