[OPE-L:5042] Re: Comments on 3 recent debates

From: Fred B. Moseley (fmoseley@mtholyoke.edu)
Date: Thu Feb 22 2001 - 21:29:40 EST

On Mon, 19 Feb 2001, Allin Cottrell wrote:

> A few comments on matters recently debated.
> 1. Price of production and technological change.
> I'm with Fred in that I don't see simultaneous equations as evil: I
> think they can provide some useful information, even if in fact
> technical change is going on more or less continuously.  But I find
> Fred's specific argument against Drewk a bit scholastic.  The "smoking
> gun" (OK, not Fred's phrase) is a set of quotations showing that Marx
> held that prices of production change _only if_ there's a change in
> labour productivity somewhere in the system, or if the wage changes.
> But Drewk's tables show prices of production changing period by period
> even when there's no change in technology or the wage, therefore Drewk
> is inconsistent with Marx.  Well, suppose we change the example.
> Keynes held (this is a simplification, of course) that aggregate
> output changes _only if_ there's a change in autonomous expenditure.
> We bump up investment (I) at some time t and let the multiplier go.
> On some interpretations of the multiplier we'll find aggregate output
> changing for many periods after the change in I, as GDP converges
> towards the new equilibrium.  Can we immediately deduce that this is
> inconsistent with Keynes's concept?  Surely not: it's a secondary
> matter whether the shift to the new equilibrium GDP occurs in one
> period (instantaneous multiplier) or takes several periods.
> Similarly, Drewk's changing prices of production converge (ceteris
> paribus) to the ones found via the method of simultaneous equations.
> Drewk's prices of production are analogous to the multi-period
> multiplier.  Change in these prices is _triggered_ by a change in
> technology or the wage (and I think _only_ by such things, though I
> certainly wouldn't claim to speak for Drewk), but the change is spun
> out over time.  So I don't see much force in the smoking gun.

Allin, this is an interesting and relevant comparison between Keynes and

I think that what Keynes meant was that the EQUILIBRIUM output changes
ONLY IF autonomous expenditure changes.  Surely Keynes was aware of the
multiplier effect of a change of autonomous expenditures on equilibrium
output, that results from the induced extra consumption (e.g. Chapter
10: "the impc and the multiplier").  But Keynes was not interested in the
intermediate, temporary, non-equilibrium levels of output in the
adjustment process from the old equilibrium output to the new equilibrium
output.  Rather, Keynes was interested in the relation between the change
in autonomous expenditure and the change in equilibrium output, the end
result of the adjustment process.

I think that Keynes' equilibrium output is similar to Marx's prices of
production, which are long-run equilibrium prices (in the classical sense
that I have specified many times).  Marx was interested in the effect of
changes in productivity on the long-run equilibrium prices.  He was not
interested in the temporary, transitional prices in the adjustment process
from the old long-run equilibrium prices to the new long-run equilibrium
prices (maybe he should be been, but he was not).  Marx was interested in
the more permanent effects of changes in productivity on the long-run
equilibrium prices.  Marx's concept of prices of production refer to these
long-run equilibrium prices, the end result of the process of adjustment.

This is in contrast to Andrew's interpretation of prices of production,
which refer to short-run equilibrium prices in the adjustment process
itself from the old long-run equilibrium prices to the new long-run
equilibrium prices.  Andrew's short-run equilibrium prices of production
change from period to period, even though there is no change in
productivity.  I think this is contrary to Marx's prices of production,
which are the long-run equilibrium prices at the end of the adjustment
process, and change only due to changes in productivity.  

What do you think?

> 2. Two sources of discrepancy between values and prices of production.
> Rakesh and Fred were working at this one not so long ago.  There's a
> real problem of inconsistency in Marx's statements here.  We have
> statements, highlighted by Alejandro and Fred, where Marx says (I
> paraphrase): "value = cost-price plus surplus value; price of
> production = cost-price plus profit". The Marx manuscript brought
> forward by Alejandro puts this in algebraic notation, giving it added
> definiteness.  But we also have statements where Marx says (again, I
> paraphrase; the quotations are well known): "There are two reasons for
> divergence between values and prices of production: (1) the price of
> the means of production employed in the production of the given
> product differs from the value of those means of production, and (2)
> the profit realized in the sale of the product differs from the
> surplus value embodied in that product."
> I'll refer to the first sort of quotations as the "cost-price plus"
> statements, and to the second sort of quotations as the "double
> divergence" statements.  These two sorts of statements sometimes occur
> in close proximity in the texts of Marx that we have available to us.
> The obvious problem is that if "cost-price plus" is a proper statement
> of Marx's view then "double divergence" is nonsense: there is one and
> only one source of divergence between price of production and value,
> namely the discrepancy between surplus value and (equalized) profit.
> It's certainly tempting to suppose that one or other of the sets of
> statements in Marx must be "not really what he meant to say"
> (otherwise his views were flat-out incoherent).  My preferred
> interpretation is that "cost-price plus" was not really what he meant
> -- or at least, that these statements only hold good on the assumption
> that the means of production (inputs) were purchased at prices equal
> to their values.  I do _not_ claim that it's clear from context that
> whenever Marx issued a "cost-price plus" statement he was in fact
> assuming that input prices were equal to input values (rather, I think
> there is a degree of inconsistency in the text -- although of course
> it's a text that Marx never prepared for publication).
> I prefer this interpretation, despite its problems, because the
> alternative is worse, namely that Marx was just gibbering when he made
> his "double divergence" statements.  I haven't seen a rationalization
> of these statements, from the proponents of "cost-price plus", that
> makes any sense to me.

Allin, I am glad that you have rejoined the discussion of the "two
divergences" and I found your comments to be constructive.  I look forward
to returning to this discussion in the near future. There is so much to
discuss!  But I think we are making progress, at least in self- and
mutual-understanding, and I think also in collective understanding.  


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