[OPE-L:3540] Re: Re:returns to scale

From: Rakesh Bhandari (bhandari@Princeton.EDU)
Date: Sun Jun 25 2000 - 21:44:35 EDT

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Re Paul C's 3535

>However I am very dubious about the reality of price of production theory
>as applied to competitive capitalist economies.

Like the equilibrium equation for interdeparmental exchange, prices of
production are theoretical, NOT REALISTIC, categories only in terms of
deviance from which can capitalist dynamics be understood. I also think
Marx needlessly exaggerates them as actual centers of gravity, though Marx
ultimately was not really interested in the explanation of relative prices
(here I rely on Mattick Sr's interpretation in Marx and Keynes and Marxism:
last refuge of the bourgeoisie?)

>It is technical coefficients that differentiate a developed from an undeveloped

So? What does this have to do with the question? Within a developed or
underdeveloped economy one still cannot determine them, independent of the
level of demand.

Alexandro Valle's work on the relative labour values of maize in
>the US and Mexico shows that there is a huge discrepancy, Maize production
>requires almost an order of magnitude more labour in Mexico than the US.
>This difference is determined by the existence of real things in the US that
>do not exist in Mexico - millions of expensive pieces of agricultural
>and by differences in climate.

Well as the market is unifed, how can we determine the number of marginal
producers which will enter into average technical conditions without
determining the level of demand? As subsidies have been removed per NAFTA
stipulations, this is not an idle question.

>can only change relatively slowly and by immense expenditures of labour.

A rapid leap in the rate of evolution of productive forces is what distinguishes
capitalism from all other modes of production. There are no transhistoric
laws, i.e., slow change, which determine the evolution of technical
conditions. This makes nonsense of historical reality and Marx's concerns.

>I have several objections to this:
>1. The whole literature on this is based on what seems to me to be a highly
>artificial time period analysis, rather than using continuous
>time. I have yet to see any of the advocates of this theory construct a
>true dynamic model, which when simulated is capable of reproducing
>their results - in particular is capable of generating the equal rate
>of profit ( rather than imposing this from outside as a constraint).

I think the transformation is a purely logical procedure on the basis of a
model of one period of production which is used to derive a theoretical
category (prices of production) that indeed has no direct empirical
manifestation. Of course this raises the question of what could then serve
as an empirical test of Marx's theory of value.

>2. There is no clear theorisation as to what an initial sum of money capital
>means as the social level.
>Does is mean the stock of cash in the hands of the public?
>Does it mean the sum of bank deposits?

It means the money capital that was laid out as constant and variable capital.

>Over time, the technology matrix changes, and values change in consequence,
>but I dont think that this invalidates the treatment of the economy at any
>instant in terms of linear models.

Talk about problems with handling dynamics?

>I accept that the general rule for capitalist economies is for returns to scale
>to increase, but such increasing returns to scale correspond to change in
>the technology matrix over time. In electrical power generation, larger
>tend to be more fuel efficient, so there was a historical tendancy to increase
>the scale of the turbines used from 180Mw , 500MW , 660MW etc.
>However these changes came in over a period of many years and are
>better treated as changes in technology. At any given year if you wanted
>to add 5,000MW to the grid, you had a range of sizes of sets that you
>could chose from, you would tend to chose some multiple of the largest
>size of set. At any given point in time the production processes can be
>realistically represented as a linear or integer programming problem.

Following James Galbraith, I think it's true that there is a rather quick
elimination of competitors in the capital goods industry--the industry
quickly moves to best practice.. But this does not change great variance in
the technical profiles of the firms which are existing at any given point
since the market for consumer goods, unlike capital goods, cannot be met
entirely by commodities produced under the most favorable conditions.
Consumer goods producers should be arrayed along a bell curve; capital
goods producers will be skewed sharply to my right.

Yours, Rakesh

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