[OPE-L:4218] Re: Re: Logic and illogic in defending Marx

From: Steve Keen (s.keen@uws.edu.au)
Date: Sun Oct 22 2000 - 08:32:36 EDT

Thanks Andrew,

Just a quick comment. Your observation that a dynamic n-equation price
model has 2n givens because initial prices are an intrinsic part of an ODE
are of course obvious to me--in fact, you might remember an aside in a
recent post that I rejected a paper I was given to referee because the
author had both an equation for prices, and an equation for the rate of
change of prices.

So my comment about being open-dimensional does not relate to this at all.
I said two things too--either you'd have to keep the system open
dimensional to avoid a TP, or if you did close it, you would get the TP in
a dynamic guise if you insisted on the premise that labor is the only
source of value, and hence of profit.

I don't per se object to open-dimensional analysis, by the way: strictly
speaking, capitalism is open-dimensional because technical change keeps
generating new products (and my colleague Russell Standish has written an
excellent paper on that in "Commerce, Complexity and Evolution: [CUP
2000]). But I would object to it if it were undertaken solely to avoid the TP.

At 23:37 21/10/00 -0400, you wrote:
>In reply to OPE-L 4206.
>: I expect that if you set out a full TSS system of dynamic equations of
>: expanded reproduction with technical change, you would have a system
>: which either (a) had the same transformation problem flaws as the
>: classic static model or (b) had more unknowns than equations.
>There is no flaw, no "transformation problem," even in the static case,
>once one heeds Marx's warning not to "go wrong" by equating the value of
>capital with the value of the means of production and labor-power.  Lots
>of people, on and off this list, by no means all proponents of the TSS
>interpretation, will tell you that.
>As for counting equations and unknowns, and the "anything goes"
>misunderstanding in general, we have heard this often.  And we've tried
>to clear up the misunderstanding.  See especially pp. 50-51 of the paper
>by Ted McGlone and I in ROPE last year, which you have.  (The term
>"anything goes" is the term we used in that paper -- I don't mean it as
>a comment on the debate between Rakesh and Allin.)
>For simplicity, assume an n-sector economy with a uniform rate of return
>on capital advanced, and no fixed capital or joint production.  By
>definition, the equations relating prices and the profit rate are
>P[t+1] = P[t]*M*(1 + r[t,t+1])
>I assume all terms are familiar.
>There are n equations.  It may look as though there are 2n + 1 unknowns
>but, in a dynamic system, the n P[t] terms are givens, i.e. they are
>already determined or initial conditions.  So actually there are only n+1
>unknowns, the n P[t+1] terms and r[t,t+1].  Only 1 degree of freedom
>remains.  This is true for Marx, it is true for numeraire theory, it is
>true for PK theory.  It is just true.  The differences among the theories
>boil down to the differences among their (single) closing equations.
>Simultaneism works slightly differently, but essentially it is a version
>of numeraire theory.
>So it just isn't true that Marx's theory, as understood by its TSS
>interpretation, cooks the books by having more degrees of freedom than
>everyone else has.  Nor does the TSS interpretation dodge internal
>inconsistencies by invoking a perpetual disequilibrium in which "anything
>goes" -- note again that the profit rate in the above equations is
>assumed to be uniform.  Rather, the TSS interpretation accurately
>reproduces Marx's results because its closing equation *is* the
>determination of value by labor-time -- assuming that the monetary
>expression of labor-time is constant, the increase in aggregate price
>(total price of output minus the total price of used-up inputs) is
>the monetary expression of the living labor extracted.
>It seems to me that the foremost empirical virtue of this principle is
>that it, unlike the other closing equations, predicts the deflationary
>or disinflationary tendency of productivity growth.
>Andrew Kliman
Dr. Steve Keen
Senior Lecturer
Economics & Finance
University of Western Sydney Macarthur
Building 11 Room 30,
Goldsmith Avenue, Campbelltown
PO Box 555 Campbelltown NSW 2560
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