[OPE-L:5609] Re: Re: Re: explanatory power and need for price theory

From: Ajit Sinha (ajitsinha@lbsnaa.ernet.in)
Date: Thu May 17 2001 - 07:20:22 EDT

Paul Cockshott wrote:

> These are valid points, and there was an extensive debate on
> this in the 60s under the rubric of reverse re-switching, where
> Sraffians showed that under certain conditions the optimal
> technology to chose depended upon prices determined by
> the rate of profit rather than soley upon labour contents and
> physical productivity. However for this to occur rather special
> conditions are required of the input/output matrix. A relevant
> question is whether such conditions are in practice met by
> real economies. The work of Shaik and his collaborators indicates
> very strongly that this is not the case, that reverse re-switching
> does not occur in real economies.
> Shaik's work indicates that choices of technology based on
> market prices and choices based on embodied labour would
> be essentially the same.


Paul, I guess you mean reverse capital deepening and reswitching. In anycase,
Sraffa's and the Srrafians' arguments are of logical nature and not of empirical
nature. The neoclassical argument that a rise in the rate of interest would lead
to a shift from a relatively 'capital intensive' to 'labor intensive' technology
is not derived through some sort of inductive logic, rather it is a logical
*deduction* from their basic propositions about marginal productivity etc. No
amount of supportive empirical observations can correct a flawed logical
deduction. Furthermore, my suspicion is that no empirical observations are made in
such a way that they are faithful to the Sraffian theoretical position. I have not
followed this literature because, in my opinion, this was one of the red herring
that neoclassicals threw out against the Sraffian attack.  Cheers, ajit sinha

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