Milano, 15 September 1997
Nonbasics, profitability and capital flows.
On 7.9.97 (Re: OPE-L 5443) Ajit Sinha wrote
" The long term rate of profit is of course
determined in the basic sector, and is independent of the production
conditions in the non-basic sector. This, however, does not mean that the
non-basic sector could have a different rate of profit than the rate of
profit determined in the basic sector. If the rate of profit happens to be
higher in the non-basic sector compared to the basic sector, then, of
course, resources would flow from basic sector to non-basic sector and
increase the supply of the non-basic goods, reduce its price and bring the
rate of profit in the line. You will have to make an argument as to why
such resource allocation adjustment could have any impact on the long term
rate of profit".
Anjit Sinha says that the 'long term rate of profit is of course determined
in the basic subsystem alone'. Now the rate of profit of the Sraffa system
has become the 'long term rate of profit'. How does Sinha know that it is
the long term rate of profit? And what exactly is a long term rate of
profit? I think it necessary to repeat my argument in a different way.
We have three sectors, A,B,C, where A and B make up the basic subsystem and
C is a nonbasic industry. Suppose that in C for any reason the sectoral
profir rate rises above the A-B profit rate (the eigenvalue profit rate).
The consequence, as Sinha himself acknowledges, are that a flow of money
capital enters C coming from A-B. A new uniform rate of profit - higher
that the A-B profit rate but lower than the increased sectoral
profitability of C - gets established from this change and then stays there
forever. How can one say that this, obviously long term , rate of profit is
not determined by the nonbasic industry C too? You have to prove that the
long term uniform rate of profit of the whole system, as calculated
independently of the eigenvalue of subsyem A-B and, hence, only on the
grounds of intersectoral capital flows, is equal to the eigenvalue rate of
profit so that in the long run you can neglect these very displacements of
capitals.
When he says "You will have to make an argument as to why such resource
allocation adjustment could have any impact on the long term rate of
profit" Sinha is exactly reversing scientific reasoning. Where a uniform,
long term profit rate comes from? From intersectoral transfers of capital:
hence it is on his shoulder that falls the duty of showing how and to what
extent this ceaeless movement is compatible with the Sraffian notion of
eigenvalue profit rate ie the profit rate of the basic subsystem alone, and
not on that of opponents of Sraffa theory to prove that the eigenvalue
profit rate is not compatible with a continuous movement of capital flows
(which thing is not very difficult indeed). The foregoing simple example of
sectors A,B,C should anyway provide what Sinha requires.
New goods as nonbasics
In the same post, Ajit Sinha added
" A novel product would of course be non-basic. However, to say that all
the
products or a large part of products that come out of every production
cycle are novel products would not be a very meaningful proposition. In
such situation it would be hard to work on any REPRODUCTION schema. "
Since the slightest change in usevalue is enough to make a product a novel
product, looking at what happens every day I feel comfortable to state that
a very large part of products that come out of each different 'production
cycle' (Sinha uses this quite mysterious expression) are novel products,
and thus nonbasic products. Sinha however think this can't be a 'very
reasonable proposition', only because accepting it would make very hard to
work any reproduction schema. I fear I have to remark this a kind of
footbal fan way of thinking: if my team loses then soccer no longer can be
considered a good game. He should have said instead: "... only because
accepting it would make very hard to work out any reproduction schema
WITHIN A SIMULTANEIST FRAMEWORK", since there is no problem in
incorporating continuous technical innovation within a nonsimultaneist
formalism as this is not founded upon a distinction between basics and
nonbasics.
With esteem,
Paolo Giussani