[OPE-L:4396] Re: Re: Re: Re: Re: growth rates

From: Rakesh Narpat Bhandari (rakeshb@Stanford.EDU)
Date: Wed Nov 01 2000 - 10:08:54 EST

re Paul C's 4378

>That is fair enough. for your argument issues to do with capital
>mobility and rates of growth may be secondary but they are relevant.
>You are arguing against equilibrium assumptions, but in
>the process you yourself are using an equilibrium assumption
>about profit rates. If you wish to rule the case of simple reproduction
>out of court as unrealistic, then you yourself have to justify having
>another unrealistic assumption - equalised profit rates.

But Paul, the equalisation of profit rates is a real tendency in a 
developed capitalism which is continually disrupted by the 
counter-tendency of the search for surplus profit (Grossmann, 
Schumpeter, Mandel, James Galbraith). As Marx puts it, we have a 
continuous equalisation of ever renewed inequalities. So it is 
perfectly legitimate to abstract from one of the other real 
tendencies. However, simple reproduction is not such a real tendency; 
it is simply a methodological artifice which simplified Marx's search 
for an interdepartmental equilibrium exchange ratio.

In fact, it was the false belief by some (revisionist) Marxists that 
capitalism could actually settle into the stagnation of high 
unemployment simple reproduction (similar to Keynesian unemployment 
*equilibrium*) which led them to underestimate the militarism and 
violence by which rival capitals would attempt to ensure their 
expanded reproduction and thrust the world into the horrors of 
renewed world war (the British CP falsely accused Preobrazhensky and 
Grossmann of believing that capitalism could settle into simple 
reproduction; see their twelve lessons in political economy, circa 
1933, perhaps written in part by Strachey, as i think riccardo b once 
sugested) . The belief that simple reproduction is a real tendency 
has thus gone hand in hand with revisionist politics  based on an 
underestimation of the catastrophes which capitalist development 
promises (still one of the great critiques of such revisionism is 
Gyorgy Lukacs' essay on the Marxism of Rosa Luxemburg). Of course I 
have assumed simple reproduction in the iteration which I have just 
proposed, but this is only for the purposes of internal critique.

>My take on this is that both are unrealistic assumptions but that
>the simple reproduction/equal profit rate example has two merits
>as a gedanken experiment:
>1. The system is sufficiently simple for the implications of certain
>     assumptions to be pursued. This is what Steadman is good at
>     for example.

well, it's stationary so it allows the output prices of production to 
be applied to the inputs. The nature of the system is thus determined 
by the putative need to carry out a determinate transformation of the 
inputs on the basis of data for the production of the outputs.

I have instead argued that Marx was correct only to note that inputs 
need to be transformed and leave it at that because there is not 
enough data to do more in his one period tableaux which instead have 
been illegitmately forced into simple reproduction and equilibrium, 
so that input prices of production can  be determined simultaneously 
with output prices of production.

Once we realize that these stationary and self replicating 
assumptions about this system's nature are arbitrary, we are forced 
back into reality and the countenance of sequential transformation 
models, like Carchedi's or my (i thought successful!) attempt to turn 
Allin's model into one period in a sequence, characterized by rising 
labor productivity.

At any rate, the transformation problem does not hold (I have just 
realized) even in the case of simple reproduction once we realize 
that both equalities are not invariance conditions.

Of course since we are only changing the prices of the inputs we are 
not changing the indirect and direct labor embodied in the output and 
thus its total value/price which do indeed remain invariant.

However since the sum of surplus value is defined explicitly by Marx 
as total value minus cost price and the rate of profit as mass of 
surplus value/cost price, the modification of cost price implies that 
the mass of surplus value and rate of profit should change once the 
inputs are transformed and cost prices modified. The equality that 
the mass of surplus value=sum of branch profits only means that in 
each iteration a sum of modified surplus value is first determined 
and then determines what the branch profits can add up to. The second 
equality in its proper macro sense is maintained in each iteration. 
It is thus perfectly possible to transform iteratively an unmodified 
system in simple reproduction into a completed price of production 
system (see Shaikh-Gouverneur) in which the average rate of profit 
and prices of production do change, thereby substantiating Marx's 
insight that it is possible to wrong unless one also transforms the 
inputs and modifies cost price.

But I'll look more carefully into the problem of joint production, 
which i suppose is the other big implication of this equilibrium 

>2. It assumes equilibrium everywhere, equilibrium in prices, in profit
>     rates and in technology.  Your model is a partial equilibrium one,
>     assumes equilibrium in profit rates but not in technology.

Again the tendency towards equalisation is real, a historical result 
of the mobility of capital and labor; the tendency towards simple 
reproduction is not real. It is legitimate to study real tendencies 
in abstraction.

All the best, Rakesh

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