[OPE-L:4153] Re: New Quiz and New New Quiz!

andrew klima (Andrew_Kliman@msn.com)
Wed, 5 Feb 1997 10:13:35 -0800 (PST)

[ show plain text ]

I basically want to hold off replying to the new stuff on this topic because I
am missing some of it. Some of my ope-l mail isn't getting through. Alan has
graciously sent me #'s 4131 and 4132, but I am still missing the following
things posted since then: 4138, 4145, 4146, and 4148.

Would someone be so gracious as to forward them to me?

I do want to clarify one thing. Alejandro Ramos quotes Allin as saying that

"In Andrews setup were not told anything about
changes in the prices of means of production."

to which Ale replies:

"That is right. Andrew didnt assume anything about this. But, how can changes
in the prices of the means of production affect the calculation of the rate of
profit obtained by Mr Wolf?"

I agree. I *purposely* didn't specify any input/output relations in my
example, just the relations between the amounts of value invested and the
amounts of value the investor expected to receive one year later. I omitted
the input/output relations because I wanted to see if people could get the
answer without that information. They could and they did (Ale, Rieu, and, by
a reasonable interpretation, Patrick).

So what, you ask? Well the fact that they could get the right answer without
the input/output relations shows that the input/output relations are
*irrelevant*. Thus the "replacement cost" of the inputs (however one
interprets the term) is also irrelevant. All that matters are the amounts of
*value* invested and the amounts of *value* expected to be received.
(Actually, the relative lengths of the investments, their riskiness, and the
investor's risk attitude also matter, but these didn't play a role in
determining where to invest, given the assumptions of my example).

I do not exclude, however, the logical possibility that other investors may
come to opposite conclusions from Ale, Rieu, and Patrick, or find the
information I provided to be insufficient to make an investment decision. I
shouldn't say more than this until I have a chance to see the Lost in
Cyberspace posts.

Andrew Kliman