Dear Paul,
I've found your discussion of values/prices of
production/profit rates very interesting.
You say finally, though, that prices of production are a bourgeois
socialist demand for fairness between capitals and that price of production
theory can be dropped in favour of value theory.
I don't think these claims follow from what you've said earlier.
Earlier you stated (and I believe you) that values and prices of production
are attractors for prices of about equal strength. You also said (and I
believe you) that profit rates are negatively correllated with organic
compositions of capital. However, these claims are consistent with 'market
prices' falling somewhere (roughly halfway) between values and prices of
production. it is consistent with prices having a tendency to conform to
values, based on the labour economising of capitals, and a tendency for
equalization of profits rates based on the striving of capitals for maximum
profits.
Dumenil and Levy have a model of competition which I think is very
good. According to their model, competition will establish classical prices
of production in three phases: first, prices in any sphere will tend to
equalize and demand will tend to balance with supply; second, profit rates
between spheres will tend to equalize; third, all but the most profitable
technology will tend to be squeezed out. They point out that the third
process is rather slow in their model, and with adjustment of parameters
(and adding some 'stickiness' in the flow of capital investment, if they
have not allowed for that) the second process might well be relatively slow
also. I have felt that classical prices of production (the price of
production based on the costs of the most profitable technique) are
unlikely to be strong attractors for market prices simply because
technological change produces new optimally profitable technologies before
competition has squeezed out inferior techniques. The same may apply,
though I think less, to equalization of rates of profit between spheres.
This would enable us to trat both values and prices of production as end
points of processses shaping market prices without assuming that these end
points are ever realized, ie, that they are ever actually 'centres of
gravitation' rather than relatively strong attractors of market prices. ( a
combination of values and prices of production may be a centre of
gravitation, as you suggest). On my reading, this leaves both value theory
and price of production theory (though at different levels) rather than
having one 'bourgeois socialist' - does anyone, apart from portfolio
investors, really care about fairness for capitals?
cheers,
Ian