I had written:
>Of course, I agree that Marx treats the falling rate of profit prior
>to his analysis of rent. However, as he discusses his falling rate
>of profit, Marx notes that he does so prior to considering components
>of surplus value other than industrial profit. Thus, it is this
>"overall" rate of profit that has a tendency to fall and not
>necessarily the industrial rate of profit. Further, as he discusses
>rent, as I recall, he does state that it forms a growing portion of
>surplus value as capital accumulates.
________________
Ajit wrote:
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.
John now comments:
1. I'm not sure what your problem is with the concept of "absolute rent."
Granted it is not in Sraffa, but can it exist for sustained periods of
time? I think so.
2. I agree that you cannot separate the agriculture sector from that
of manufacturing in any simple way. My way of reading Marx's exclusion
of natural monopolies from the transformation process differs from
yours. Marx begins by presenting us with 5 capitals of varying
compositions. We do know that none of them is a natural monopoly.
But what stops Marx from including the products produced by natural
monopolies as part of the C and v of the 5 capitals? To be sure,
this would introduce more problems into the transformation quagmire
but the basis for excluding from an interpretation of Marx is, at
best, unclear.
Ajit continued:
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:
I simply think the problem is worth investigating. Granted that Marx
is generally seen as maintaining that there is a tendency for the
industrial rate of profit to fall. Yet, he leaves open the possibilty
that the sector which garners agricultural rent may play a role. I
think it would be wrong to assume that this represents some sort of
return to Ricardo since for Marx productivity is increasing in all
sectors. For Marx, it is a question of relative rates of growth.
John had written:
>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?
___________
Ajit continued:
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 comments:
I'm still unclear about your dismissal of absolute rent. Perhaps,
dismissal is too strong a word but I'd like to know why you think
the concept or theory is "in jeopardy."
John had written:
>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.
_____________
Ajit wrote:
And the differences in rates of profits between sectors have nothing to do
with "anticipated rates of return"?
John comments:
They don't? Here, the question is what motivates capitalist to move in
and out of the various sectors. Is it the anticipated rate of profit or
the anticipated rate of return? If it is the later and we observe more
or less equal profit rates in the various sectors, it would seem natural
to ask, "Why?"
(snip)
John had written:
>
>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.
____________
Ajit wrote:
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.
John now comments:
1. I will, of course, agree that you can take "a set of technology as given"
as you are "deriving prices." But if technical change is more or less
continuous, of what use are the derived prices? Here, you state that
we need these prices to "understand the basic structure of the capitalist
economy." My point is simply that the price we pay for these derived
prices is knowledge of the dynamics of capitalism.
2. As always, I am unclear about how this notion of derived prices creeps
into Marx's transformation procedure. Historically, it would seem that
even some sympathetic to Marx accepted the idea that justification
of the labor theory of value required the derivation of prices from
values. That Marx himself did not do this is clear. Rather than
take this as a clue that that is not the way to go, correcting
Marx became the order of the day.
Let's step back a moment and consider what we are saying. That
Marx "forgot to transform the inputs" is too often accepted with
little thought to the obvious implication -- Marx was really
stupid. Nowhere in economics do we find such a colossal
blunder. Indeed, it is so apparent that any basic survey
course treating Marx can use this to quickly dismiss what he
has to say. This is not to say that Marx never made mistakes,
rather to note prior to accepting this criticism of a thinker
like Marx other possibilities should be, at least, explored.
John had written:
>
>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.
_____________
Ajit wrote:
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.
_________
John comments:
As always, I will look at Schefold and do appreciate your statement that
"...as far as I understand, there is no solution to your problem."
But is not the problem I pose real? Should we not be able to deal with
structures of production and technical change at the same time? Is
something not amiss if the tools we use prevent us from doing so?
I think what you call TSS theories of price more or less accept what
Marx had to say on the transformation problem. I see them as an
attempt to move toward the more dynamic issues of capitalism. I
think it is much too early to simple say that the price theory of
TSS is meaningless since the criteria you use imply that we will never
have a theory that captures the notion of technical change and that
of prices.
John had written:
>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.
___________
Ajit wrote:
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.
John comments:
You're right, I was a bit rhetorical. But let's take a look at
ourselves. What we are dealing with is a theory of prices.
I'd be the first to admit that it is a "well thought through" theory.
But as you have noted, it cannot be used for an economy in which
technical change is more or less continuous. Yet, in dealing with
reality, this is what we face. I am willing to move away from a
theory that bars consideration of that reality. If that means
accepting Marx's transformation procedure as an explanation of
prices rather than as a derivation of prices, for now I am willing
to do so. You are not. We differ. This means that, again for now,
I am willing to accept Marx's transformation procedure and, without
correcting him, you are not. Again, we differ. Quite honestly,
what I fail to understand is your accpetance of a theory that
does not even attempt to understand the "economic law of motion
of modern society." But, perhaps here I read too much into what
you are saying.
As always,
John