[OPE-L:3541] Re: Re: Re:returns to scale

From: Paul Cockshott (wpc@dcs.gla.ac.uk)
Date: Mon Jun 26 2000 - 10:45:13 EDT

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At 21:44 25/06/00 -0400, you wrote:
> >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,

You are of course quite right that one can expect under Marx's price of
production theory for actual rates of profit to be distributed around
the mean. That is no problem for his theory, so long as the rates of profit
are uncorrelated with the organic composition.

In the standard (strong) statement of the transformation problem the
rates of profit are assumed to be identical in all branches. One can
modify it to a (weak) transformation problem in which one merely assumes
that whilst profit rates may be a random variable they are uncorrelated
with organic compositions.

The problem arises when there is a systematic correlation between
organic compositions and rates of profit. In particular, if there is a
negative correlation between them, then the problem of transforming
values into prices of production becomes less pertinent, since the whole
transformation problem arises from the assumption that profit rates
being either a degenerate distribution or being at least uncorrelated
with organic composition.

Consider the implication of values rather than production prices being
the centers of gravity of market prices. The implication of this would be
that industries with high organic composition would have low rates of
profit. This is rejected by Ricardo in Chap iv of his principles, and the
Marx carries over this rejection without questioning it. But if it turns
out to be the case that industries with high organic compositions do
have low rates of profit, then Ricardo's objection to commodities
exchanging in proportion to labour contents falls.

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

The point is that in my understanding historical materialism has to start
out from
the material conditions of production. Unless you do that any other magnitudes
have no purchase. A sum of money is just a set of entries in the ledgers
of banks, and as such has not tie up to real values. Even a quantity of
gold coin has no tie up to values unless you know the conditions of
production. So to start ones analysis at the level of the economy
as a whole with a quantity of money gives you an under determined

I wrote:
> Such
> >conditions
> >can only change relatively slowly and by immense expenditures of labour.

You replied:

>A rapid leap in the rate of evolution of productive forces is what
>capitalism from all other modes of production.

I was talking about changes in the technology matrix of an economy
only taking place relatively slowly and at imense cost in labour. I agree
that if one is looking at a historical time scale of centuries, as implied
by your comparison with other modes of production, the change is
fast, but at an annual rate it its typically slow - a few percent a year.

Within this time scale, say 2 to 3 years, the difference between a
linear and a non linear model of returns to scale is sufficiently
small to be ignored.

Even on the longer term one can model technical change using
a basically linear Sraffian model provide that you make some simple

1. The sraffian model typically assumes that you have a set of production
      processes and associated intensities. It should be noted that the
      intensities associated with individualprocesses can be zero.

2. It follows that one can model technical change by assuming that
     there exists a large collection of processes operating at zero intensity
     which represent technologies that are either obsolete, or, unreachable.

3. A process can be unreachable if it uses inputs that are currently not
     being produced. If we place the restriction that all input coefficients
     should be integer valued ( rather than real ) we can model the fact
     that you need a certain minimum quantity of an input for
     production to take place.

Given these simple extensions, a linear model is capable of handling
technical change.

Using a model like this you can understand why certain economies
in the process of industrialisation can develop at more than a few
percent a year - basically it is because they are able to activate
more productive techniques using imported machinery.

> >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.

What information is required to compute this?

Would I be right in assuming you would need to know current wages,
current stocks of all means of production and current prices of all means
of production?

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