Andrew tried to post the following without success. I tried once before.
Here's hoping that the third time will be a charm./ In solidarity, Jerry
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A reply to Ajit's ope-l 4627.
He writes: "Why dance around such a simple question, which everybody, I'm
sure, has understood by now. The question is simple. Do you have a theory of
prices? Now, if you keep those determinants constant, then wouldn't those
prices come out to be the same from one period to another? Or do you consider
prices to be completely
arbitrary?"
Ajit is going around in circles. This was the original question he asked me,
and which I answered. My answer was yes, if *all* the determinants of the
output prices of 1996 and 1997 are the same, then the output prices of 1996
and 1997 must be the same.
But the input prices of 1996 are NECESSARILY given, already existing, at the
start of 1996, and not determined during 1996. That is because the output
prices of 1995 were determined during 1995, and, since the output prices of
1995 ARE the input prices of 1996, the input prices of 1996 were determined in
1995.
This is not a complete theory of price, but it is a necessary element of any
theory of price that (a) does not permit future prices to determine past
prices and (b) does not permit the same commodity to have two different prices
at the same place and time.
Notice that it does not imply that prices are arbitrary. The output prices of
any year are fully determined by a set of events occuring before and during
that year, including those events which occurred before that year and which
determined the input prices of that year.
Can you identify any internal inconsistency in this reasoning, Ajit? If so,
please tell us what it is. If not, please state that you cannot.
Andrew Kliman