If I may be permitted some more remarks: I think Marx has a very different
notion of "equilibrium" than anything you will find in a conventional
economics textbook, and we should not confuse conventional notions of
economic "equilibrium" with Marx's notion. After all, at the core of his
theory of capitalist development is the idea that capitalist development
is always UNEVEN development. Equilibrium at one point in the system is
always accompanied by disequilibrium somewhere else. The same forces which
create a relative balance at one time fall into contradiction with each
other and create imbalance after a while. That's why Marx uses the language
of dialectics to describe what happens. And that's why a preoccupation
with modelling capitalist economic equilibrium would seem to involve almost
a malabstraction. If anything, we should be concerned with the way the
system is moving and changing, not keep on wondering how the system manages
to maintain a relative equilibrium.
Paul writes:
>1. The dispersion of profit rates within firms in a given industry
> is also significant and can be large relative to the dispersion
> between industries.
I think that is compatible with Marx's theory.
This is generally left out of mathematical
> models which use only a single method of production per
> industry, with an associated single rate of profit.
In my limited experience, the trouble with mathematical models of
economists in general is that they cater for only a few variables at the
time, and rest on a lot of assumptions, which may be untenable in real
life. They offer rigour and precision, but at the expense of the
complexity of real economic life. So what sort of theorising are we
talking about then ? Theorising which is connected in the wrong way with
the empirical facts. I am not wishing to say mathematical modelling is
useless, to the contrary, you need mathematics to build socialism, but
there is also such a thing as the abuse of mathematical modelling.
>2. It is not at all clear that the average rate of profit on invested
> capital accross all industries will be relevant to a firm when
> deciding on investment. It is equally plausible that it will be
> the rate of interest that is taken into account. The rate of
> interest is known, the average rate of profit is not.
Marx's analysis would lead you to expect that capitalists use all sorts of
criteria to judge the "economic weather" in making investment decisions, up
to and including social, political and psychological factors. In my limited
experience, capitalists do often have hunches or estimates of an "average
or normal return" in their line of business, although they may not be
statistically exact and may be stated in different ways.
To take an exceedingly simple example: if you borrow money at a certain
rate of interest in order to make money with it, it is obvious that you
have know something about your own (expected) profit rate. If you know your
own profit rate, then you can know somebody else's. And if the amount of
capital involved gets very large, then you are motivated to avoid big
mistakes. Small mistakes maybe, but not big mistakes.
>3. Real capital, as opposed to money capital, has limited mobility
> between branches of production weakening any tendancy
> of the rate of profit to equalise.
I would actually make this a bit stronger and argue that the actual growth
process of the capitalist mode of production is not accompanied by ANY
effective equalisation of the rate of profit. That is, the equalisation of
the rate of profit is only the tendency over a period of time.
>4. An alternative model for price determination favoured by Kalecki
> is that prices are determined by a markup on prime costs -
> principally labour costs, if that is the case prices will tend to
> shadow values.
I haven't read a lot of this Polish economist, to be honest. A friend of
mine thought he sounded kind of sexy, and an acquaintance of mine believed
in his theory of "political business cycles". At that time I thought Marx's
analysis was more subtle. But Marx never wrote comprehensively on business
operations "at the surface of society", and as they appear to economic
actors (as we have to try to do today). His key point was only that
commodity fetishism and competition inverts the real process in the eyes of
economic actors, and he wrote on what he thought to be the real process. I
am not an Althusserian but Althusser did say, correctly I think, that
Marx's Capital is a "radically unfinished work".
>5. A factor tending to favour a markup on prime costs as a
> regulator is that the bargaining position of trades unions
> is strongest with industries earning above average markups
> on labour costs. This may tend to limit the dispersion of
> prime cost markups.
>
That would be possible, but industries with above average markups on labour
costs would also tend to have above average markups on other costs,
wouldn't they ? (I didn't mean by my remarks in my previous post that
capital-labour conflicts cannot influence price movements !)
Regards
Jurriaan