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From: owner-ope-l@galaxy.csuchico.edu on behalf of Ian Hunt
Sent: Tuesday, February 24, 1998 9:25 PM
To: ope-l@galaxy.csuchico.edu
Subject: Re: [OPE-L] What is the debate is about?
I very much appreciate Ian's willingness to engage in thought experiments in
order to work these issues out. It is that kind of attitude that I think we
need more of.
Given that the IWGVT miniconference is less than 60 hours away, I don't have
time to respond to the comments about equilibrium methodology at this time. I
do want to respond to the thought experiment.
Ian writes: "So, initially, money is used to purchase labour power and means
of production at prices equal to values, and in the end a product is sold at a
price which takes into acount the distribution of surplus value between
capitals. My difficulty is that any such acount, as I see it, should work
when there is no change in technology or supply and demand, so that selling
prices from one production period to the next are the same.(I can't see why
the relationships dealt with shoul;d crucially depend on technological change
or imbalances in supply an demand) My difficulty then is that the selling
price of a given commodity, say steel, at the end of one production period
must be the same as the purchase price of steel in the subsequent period (if
there is no middle man). But then, on the historical analysis, this price will
be both equal to and different from the value of steel (which is also the same
from one period to the next as no technological changer has occured)."
I have no problem with assuming that initial input prices = values, but it is
not a premise of the TSS interpretation. Some of us have employed it as an
illustrative assumption on occasion, but that is a different matter. For the
sake of generality, let's not assume it.
Ian's thought experiment can then be restated as follows. We have two
production periods, 1,2. Selling prices are the output prices of the two
periods P1(out), P2(out). Purchase prices are the input prices P1(in),
P2(in).
The crux of the matter, then, is this: Ian thinks his assumptions ("no change
in technology or supply and demand" during the two periods) imply that the
input prices of the two periods are equal, and that the output prices of the
two periods are equal. *If* that were true, I would agree that the TSS
interpretation is logically flawed. But I do not think his assumptions imply
that.
Ian recognizes something *absolutely crucial*: "the selling price of a given
commodity, say steel, at the end of one production period must be the same as
the purchase price of steel in the subsequent period ...." Hence
[1] P1(out) = P2(in).
He specifies his assumptions for periods 1 and 2 only. This permits me to
make an assumption concerning period 0. I will assume that the technology of
period 0 differs from that of periods 1 and 2. I think Ian will agree that,
in general, this will mean that the output prices of period 0 differ from the
output prices of period 1. Hence,
[2] P0(out) not= P1(out).
By the same logic that requires that P1(out) = P2(in), we must require that
[3] P0(out) = P1(in).
Thus, combining [2] and [3],
[4] P1(in) not= P1(out).
And, [1] and [4] imply:
[5] P1(in) not= P2(in).
So that the input prices of periods 1 and 2 are NOT equal, despite the fact
that the technologies, etc. of those two periods are the same.
I hope Ian will also agree that the input prices of a period may be
determinants of the subsequent output prices of that same period. This
implies that, if the input prices of two periods differ, ceteris paribus, the
output prices of the two periods will also differ. But by [5], we know that
the input prices of periods 1 and 2 do indeed differ, and from Ian's
assumptions, we know that the ceteris paribus condition is satisfied. Hence
[6] P1(out) not= P2(out).
So that the output prices of periods 1 and 2 are also NOT equal, despite the
fact that the technologies, etc. of those two periods are the same.
These conclusion seriously call into question theories that claim that
equilibrium (supply = demand) prices are determined solely by technology and
real wages. Basically, such theories violate [1] and [3]. The TSS
interpretation respects them.
Ciao,
Andrew Kliman