In his ope-l 5081, Ajit brings us back to an earlier point in the discussion,
and I'm glad he did.
He writes: "You cannot have a theory of prices which is determined by prices,
as your interpretation of Marx does."
This statement recalls the criticism he made in ope-l 4402:
"Let us suppose the system is in simple reproduction schema, just for
simlicity sake, and that nothing in the world changes from period zero to
period one. In this case every reasonable person would think that the prices
in period one would remain the same as the prices in period zero. ... You
cannot have a theory of prices when prices are determined by prices
themselves, no matter whether you call one price "value" or whatever. To have
a theory of prices, you must determine prices from some data other than
prices."
Ajit also holds, as I do, that a commodity must have the same price as the
output of one period and as the input of the next. I had written: "I think
that Gerard Dumenil and Dominique Levy are reasonable persons. In their
recent paper, "The Conservation of Value: A Rejoinder to Alan Freeman" (March
27, 1997), they acknowledge, on p. 15, that "A commodity cannot have a price
as the output of one production period, and another as the input of the next
period, since there is only one transaction." Ajit replied, in ope-l 4677,
"Who would disagree with this statement, which is a tautology."
Good. Let's consider a two-department economy.
In period -1,
Department I uses 5 units of commodity 1 and 2 units of commodity 2 to produce
12 units of commodity 1.
Department II uses 2 units of commodity 1 and 8 units of commodity 2 to
produce 12 units of commodity 2.
The rate of profit is equalized, and input prices equal output prices.
Hence, a unit of commodity 2 exchanges for 2 units of commodity 1, and the
uniform rate of return on capital advanced is 33-1/3%.
Now, in periods 0 and 1, we adopt the conditions Ajit suggests: "the system
is in simple reproduction schema ... and ... nothing in the world changes from
period zero to period one." Consonant with that, let us assume that in both
periods -- period 0 and period 1,
Department 1 uses 8 units of commodity 1, and 1 unit of commodity 2, to
produce 12 units of commodity 1.
Department II uses 4 units of commodity 1, and 5 units of commodity 2, to
produce 12 units of commodity 2.
I challenge Ajit to put some numbers where his mouth is. Specifically, I
challenge him to come up with ANY set of input and output prices for periods 0
and 1 that satisfies the following conditions:
(1) "[T]he prices in period one ... remain the same as the prices in period
zero." This means that the input prices of period 0 equal the input prices of
period 1, and the output prices of period 0 equal the output prices of period
1.
(2) The rate of profit is equalized in both periods.
(3) No other changes in conditions between periods 0 and 1 (e.g., foreign
trade) may be introduced, because "nothing in the world changes from period
zero to period one,"
(4) Since Ajit agrees that "[a] commodity cannot have a price as the output
of one production period, and another as the input of the next period, since
there is only one transaction," the unit input prices of period 0 must equal
the unit output prices of period -1, and the unit input prices of period 1
must equal the unit output prices of period 0.
(5) Although Ajit may choose whatever units he wants in which to measure
prices, the units of measurement must be consistent throughout the time
period, from the start of period -1 through the end of period 1.
If Ajit meets this challenge successfully, I will acknowledge that what he
calls my theory of prices is absurd. I will acknowledge this publicly and, if
possible, in print.
If he fails to meet it successfully, I suggest that he acknowledge that his
own price theory is not only abstract, but also absurd, because it violates a
tautology; and not only absurd, but self-contradictory and thus impossible.
Fair enough?
Andrew Kliman