If you go back to Ricardo's alleged 'corn model' strategy you will find
that what Ricardo was trying to do was to suggest that the rate of profit
gets determined in the agricultural sector independent of the manufacturing
sector, and so it is the rate of profit determined in the agricultural
sector that would rule the rate of profit in the manufacturing sector as
well. Of course, Malthus pointed out that it was not legitimate for Ricardo
to treat the agricultural sector as, what we will call now, the all of
basic goods sector. Marx in a way seems to take a strategy opposite of
Ricardo. He tries to determine a general rate of profit in manufacturing
sector independent of agricultural sector, and then tries to make this rate
of profit rule over the agricultural sector. Given his supposition that the
organic composition of capital is lower in agricultural sector compared to
the manufacturing sector, when the two sectors are now brought face to face
the rate of profit does not get equalized by the usual mechanism of
relative prices, in this case manufacturing prices rising vis-a-vis
agricultural prices, but rather the rate of profit is brought to equality
by the excess profit in agricultural sector being skimmed off by the class
of landlords. Now as i see it, the problem with this scheme is the same as
was with Ricardo. You simply cannot keep manufacturing and agricultural
sectors in separate boxes. Many of the raw materials used in manufacturing
sector would be agricultural products, and most importantly a large part of
the wage basket would be agricultural goods. Thus when Marx is trying to
equalize the profits in the manufacturing sector, he cannot leave the
agricultural sector out. As I said Marx's theory of ground rent has serious
theoretical problems. I can understand why Sraffa only deals with
differential rents and not absolute rent, since in the end it does not make
too much sense.
Anyway, I simply don't understand your statement above beginning from
"However..." Since Marx is not considering any other portion of surplus
value except industrial profit when discussing the falling rate of profit,
it is obvious that the falling rate of profit must be about the industrial
rate of profit. You seem to be suggesting the opposite. Moreover, as i have
explained above, in Marx's scheme the industrial rate of profit is the
ruling rate of profit for the whole economy. Thus if there is a tendency
for it to fall, then the rate of profit for the whole economy must fall as
well.
________
>John now comments:
>
>1. I assume that your S/(C+V) includes what Marx calls "natural
>monopolies." If so, how could this rate of profit equal the
>average rate of profit?
___________
As I explained above, in Marx's scheme the S/(C+V) contains only the
industrial sector, so there is no natural monopolies here. In my opinion
there is no problem in taking the S/(C+V) for the whole economy as well.
But this would result in putting Marx's theory of absolute rent in
jeopardy, but then I think it is in jeopardy anyway.
____________
John:
>2. I think Dumenil and Levy's book raises an interesting question --
> Why would the rate of profit tend to equalize? They are well
> aware that capitalists invest according to anticipated rates of
> returns to investment and not rates of profit.
_____________
And the differences in rates of profits between sectors have nothing to do
with "anticipated rates of return"?
_______
>John now comments.
>
>In Sraffa's work, we see only differential rent. In Marx, we see both
>absolute and differential rent. If part of surplus value in your
>S/(C+V) is absolute rent, then how can the surplus value in those
>sectors be "shared" with the capitalists in other sectors? To be
>sure, this assumes that sectors in which absolute rent is present
>have a lower composition of capital than average.
__________
I think my response above answers all the points raised here.
_____
>John now comments:
>
>The intractability may not stem from my thinking but from the problem
>posed.
>
>1. I accept what you say about the stationary state and will check out
>Schefold's book. However, the key issue here is the goal of the
>analysis. Are we trying to determine a set of prices only in cases
>where there is no technical change? Or, are we trying to describe the
>"economic law of motion of modern society"? If it is a set of
>prices we seek to derive, then one could abstract from technical change
>and, with a few more assumptions, carry out the derivation. To
>say that Marx did this is a stretch. In other words, I do not
>know where in his transformation procedure he claims there is no
>technical change.
____________
For any given time for which you are deriving prices, a set of technology
can be taken as given. It simply does not require a notion of technical
change. I think that you do need a theory of prices to understand the basic
structure of capitalist economy. I also think that it is not possible to
develop a 'dynamic' theory of prices since the measure of prices cannot be
kept stable in this context. As far as marx's transformation problem is
concerned, his c's, v's, and s's represent a given technology. The
transformation of values to prices of production is conducted on the given
technology. The question of technological change does not even arise here.
______
>
>2. For Marx, capitalists are well aware that technical change
>takes place as they invest. Indeed, they know that the economic
>lifetime of fixed capital is less than its natural lifetime.
>In what I have read of Schefold, the natural lifetime is all
>we find. Yet, capitalists invest and compute their rates of
>return based upon the economic lifetime of fixed capital. How
>can we compute that lifetime? We need to know both the prices
>of production and the rate of technical change. You're right
>the problem does, indeed, become "intractable" but only if we
>insist on deriving prices of production. However, if our
>object is to explain the phenomenon of prices of production,
>to do so we need not derive them.
_____________
The chapters I suggested to you from Schefold deals with fixed capital and
technical change, at least 18b. It may not solve your problem, as far as I
understand, there is no solution to your problem, but it will give you some
idea about how to go about this issue. If you think TSS has a theory of
prices which you can use to solve your complicated problem, then, in my
opinion, you are simply wasting your time. The TSS theory of prices or the
solution to the transformation problem is simply meaningless as I have
proven on this list many months ago. You got to have a sound foundation to
solve a complicated problem as yours.
_________
>
>The derivation of prices from values or from a structure of
>production is deadly. We can easily generate cases in which
>all in a given society see a falling rate of profit while the
>derived price system tells them it is rising. To assume that
>there is no technical change for the sake of deriving such a
>price system is, at best, obscurantist. As economists, we need
>a notion of prices that can be used as we take into account
>technical change not one that forbids from even considering it.
___________
This sounds like a speech rather than an argument. No body is saying that
the theories which we have are good for solving all the problems or that
they have no limitations. But that does not mean that we should replace
well thought through theories with gibberish. Give us your alternative.
Cheers, ajit sinha
>
>
>Stay well,
>
>John
>
>