At 05:19 PM 5/20/97 -0700, Andrew Kliman wrote:
>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."
___________________
By the way, you have not responded to my reply to your ope-l:4671. That
reply proves the absurdity of your procedure of determining prices from
prices. I'll try to send that again on the net if I can find it. Had you
tried to come to grips with that critique, you would not have come up with
this hollow challange.
______-
>
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.
__________________________
The production conditions in period 1 and period zero gives price ratio
equal to 1:1 and the profit rate equal to 33.33%. What is your problem with
this? Why price ratio from period -1 to zero has changed? It is because you
changed the technology. You reneged on your own assumption. Everybody knows
that a change in technology will lead to change in prices. What you don't
seem to understand is that when you are determining the rate of profit, you
must determine it on the value of the capital at the time of the
determination of profit. The rate of profit of period zero can only be
determined after the production is over, and at this juncture the prevailing
price ratio of the two commodities is equal to 1:1.
Your argument seems to run this way: Let's suppose y is chosen as the money
commodity. And given the prices in period -1 equal to 1y = 2x ( and mind
you, you have arrived at these prices by assuming same input-output prices
and equalizing the rate of profit, otherwise you have absolutely no way of
arriving at the prices in period -1, and your whole exercise will become
void and absurd), you want to calculate the capital investment of period
zero on the basis of this exchange ratio. Thus the capital investment in
department one becomes 5 and in department 2 it becomes 7. Now what you want
to do is to put the equation for period zero as:
Department 1: 5 (1+r) = 12x
Department 2: 7 (1+r) = 12y
Now, to determine the three variables from the two equations, you would
again want to put the value of y =1, which basically amounts to saying that
the technical change had no impact on the money commodity, which would be an
absurd claim. The absurdity of the whole thinking process becomes quite
clear when we alternately chose y as money-commodity, and then x as money
commodity. When we put y = 1, the rate of profit r becomes equal to 5/7, and
when we put x = 1, the rate of profit r becomes equal to 7/5. I hope by now
you must have started to see the light.
Cheers, ajit sinha