[OPE-L:7419] [OPE-L:951] Re: Re: Marx's concept of prices of production

Ajit Sinha (sinha@cdedse.ernet.in)
06 May 99 11:49:12 IST (+0530)

>John writes:
> Now we travel to a region you don't like -- absolute rent.
> Given that
> we use all production processes to determine the rate of profit
> and
> that some of those sectors earn an absolute rent, we quickly see
> that
> its inclusion means that the rate of profit or RRI computed with
> the
> inclusion of this type of rent makes the Sraffian procedure of
> determining
> the rate of profit impossible. That is, Sraffa is forced to
> assume that
> all sectors earn or can earn equal rates of return as he finds
> the overall
> rate of return. Given the existence of private property and the
> consequent concept of absolute rent, unequal rates of return
> prevail.
John, this is simply wrong! Have you read Sraffa's chapter on Land
in *PCMC*? The position of land is equivalent to the position of
non-basics in Sraffa's system. So it has no impact on the rate of
profit. The question of absolute rent has also been taken care by
Sraffa. On this issue, again, there is very little difference
between Sraffa and Marx if one looks at the two thinkers closely.
But you must read his chapter on Land.
> Had I been responding to Fred's idea that prices of production
> represent
> some sort of long run equilibrium prices, I would also say that
> absolute
> rent means that the prices of production in Ch. 9 are not
> equilibrium
> prices. Why? Simply, by including those sectors that earn this
> type
> of rent we have no idea how much of the surplus profit they
> produce
> is represented in the prices of the competitive sectors. That
> is, since
> the amount of absolute rent is, at most, the difference between
> the value
> and price of production of the commodity produced, we have no
> information
> to determine whether or not that rent is at a maximum. Clearly,
> to
> transform Marx's prices of production into equilibrium prices as
> I think
> Fred attempts, we would need to know something about the demand
> for
> commodities that earn absolute rent.
As above, see Sraffa. Your concerns seem to be misplaced.
> I had written:
> >But let's deal with another issue here and now. What is
> the "long-run"? Is there technical change in this "long-
> run"? If not, why not? Given the use of the term
> "long-run" -- in modern economics its unclear what the term
> means in the Marxian context.
> Ajit wrote:
> Sraffians usually use the term "long term" rather than "long run"
> to distinguish their concept from Marshallian "long run". "long
> term" is long enough time to allow for capital movements across
> industries in response to differential rates of profit. But these
> "long term" prices can be determined independently of the
> adjustment process, that is why the properties of the system can
> be
> analyzed independently of the process that brings the system to
> equilibrium.
> Comment: 2 questions
> 1. As capital shifts from one sector to another, do techniques
> change?
The real question for you is that whether the capital movement
itself brings about technical change or not. As long as capital
movement which takes place in order to bring about the uniform rate
of profits is not a cause for technical change, then there is no
logical problem with the concept of long term prices. If you
introduce technical change from outside, while the capital
movements to bring about uniform rate of profits is going on, then
all you do is that you change the long term prices for that
particular time. The long term prices are defined independently of
the historical time that is supposed to bring about the
equilibrium. it is defined for a given point in time, given
technology, real wages, and total output.
> 2. Are the rate of profit and "long term" prices the same as
> those
> seen when the system reaches equilibrium?
They are compatible with the equilibrium position. But there is no
requirement that the system must be in equilibrium for the analysis
of the system based on long term prices.
> John:
> I had written:
> >3. I'm as confused by "long-run 'center of gravity' prices" as
> I
> am by "long-run average prices." Are these average prices
> computed using prices of production in various periods? As
> we compute this average is technical change taking place?
> ____________
> Ajit wrote:
> I think "average" is a poor choice of word in this context (I
> myself have used 'average profit' on one occasion in print I
> think,
> and I regret that) Prices of production is not some kind of
> statistical average derived from a bunch of observed 'market
> prices'. The gravitational point is determined independently of
> 'market prices', as in the case of pendulum--its gravitational
> point is determined independently of the position of the pendulum
> at any
> given time.
> Comment: But given your perspective would not the price of
> production
> be the expected value of the market price?
Not really. It's not a statistical concept at all.
Cheers, ajit sinha