In OPE-L 4941, Rakesh seemed to agree that Fred's "prices of production and profit rate [are] physicalist, i.e., ... functionally determined by physical quantities (input-output and real wage coefficients) ... [in the sense that] to each set of input-output and real wage coefficients, there corresponds a unique set of production prices and a unique uniform profit rate." Rakesh seemed also to agree that this definition of functional determination "says NOTHING about physical quantities being 'fundamental givens,' initial data, or anything of the sort." I thought to myself, this is too good to be true. It was. Rakesh still hasn't gotten the point. In OPE-L 4983, he writes "The very point of Fred's elaboration of his macro method is to counterpose it sharply to simultaneous equations! For example, the methods yield different magnitudes in the average rate of profit once there are changes in the technical conditions in a luxury sector." The last sentence is COMPLETELY UNTRUE. The reason it is untrue is that Fred is a simultaneist. His prices of production and profit rate are therefore physicalist -- functionally determined by physical quantities (input-output and real wage coefficients), in the sense that to each set of input-output and real wage coefficients, there corresponds a unique set of production prices and a unique uniform profit rate. Fred's METHOD, turning on "fundamental givens," initial data, etc. has NOTHING to do with it. For the umpteenth time, I will now PROVE what I have just said -- something neither Fred nor Rakesh seem willing to do with their assertions. I. Assume a two-sector economy. Sector f produces food by means of food and living labor; sector y produces yachts, a luxury good, by means of food and living labor. Workers' consumption consists of food. There is no fixed capital (for simplicity). II. Define: Cj = constant capital used up in producing good j (food, yachts) Vj = variable capital Sj = surplus-value Mj = aggregate price of production of sector j Rm = (Sf + Sy)/(Cf + Vf + Cy + Vy) = Fred Moseley's general profit rate. Pj = unit (output) price of production of good j Aj = amount of food required as input by sector j to produce one unit of output b = food wage (equalized) per unit of living labor Lj = living labor required as input by sector j to produce one unit of output Xj = gross output of sector j Unit *input* prices also equal Pj, the *output* prices, in accordance with Fred's interpretation. III. Since total price = total value, Mf + My = (Cf + Vf + Sf) + (Cy + Vy + Sy) = (Cf + Vf + Cy + Vy)(1 + Rm). Thus, another way of expressing Rm is (1) Rm = (Mf + My)/(Cf + Cy + Vf + Vy) - 1 IV. The magnitude of the physicalist (Sraffian, etc.) general rate of profit depends only on Af, b, and Lf. Specifically, (2) Rp = 1/(Af + b*Lf) - 1 = physicalist general rate of profit. Note that technical change in luxury production has no effect on its magnitude. Fred denies that the same is true of Rm. Rakesh reiterates the denial. They are wrong. I will PROVE they are wrong by proving that Rm = Rp. V. The Cj, Vj, and Sj and thus Rm are "determined in the prior analysis of capital-in general in Volume I." They are "logically prior" to the formation of production prices and the equalization of the rate of profit. To emphasize this point, I will be putting the ALREADY-DETERMINED magnitudes on the RIGHT, and the TO-BE-DETERMINED magnitudes on the LEFT. For instance: (3) Pf*Aj*Xj = Cj This means that, WHATEVER may be the magnitudes of Pf, Aj, and Xj, their product MUST equal the *already-determined* amount of constant capital advanced, Cj. Similarly: (4) Pf*b*Lj*Xj = Vj , and (5) Pj*Xj = Mj . VI. Now, Fred's rate of profit is equalized, so My/(Cy +Vy) - 1 = Mf/(Cf +Vf) - 1 and thus My = Mf*(Cy + Vy)/(Cf + Vf) Hence, using (1), Rm = [Mf + Mf*(Cy + Vy)/(Cf + Vf)]/[Cf + Cy + Vf + Vy] - 1 = [Mf*(Cf + Vf + Cy + Vy)]/[(Cf + Vf)(Cf + Cy + Vf + Vy)] - 1 = Mf/(Cf + Vf) - 1. So, Rm = Mf/(Cf + Vf) - 1. VII. Finally, substituting in the left-hand sides of (3), (4), and (5) in this last expression for Rm: Rm = Pf*Xf/(Pf*Af*Xf + Pf*b*Lf*Xf) - 1 = 1/(Af + b*Lf) - 1 = Rp. Hence, Rm = Rp. Since Rm is equal to Rp, and Rp is functionally dependent only on Af, b, and Lf, the same is true of Rm. Technical change in yacht production has no effect on its magnitude. Q.E.D. VIII. The above result is contrary to what Fred claims and Rakesh reiterates. More importantly, it is contrary to Marx's theory. Fred's macro-monetary interpretation fails. The reason for the failure is his simultaneism, i.e., the fact that the input price of food in (3) and (4) is constrained to equal the output price of food in (5). Andrew ("Drewk") Kliman Dept. of Social Sciences Pace University Pleasantville, NY 10570 USA phone: (914) 773-3968 fax: (914) 773-3951 Home: 60 W. 76th St. #4E New York, NY 10023 USA "The practice of philosophy is itself theoretical. It is the critique that measures the individual existence by the essence, the particular reality by the Idea."
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