# [OPE-L:7467] Re: RE: Re: Re: Re Aoki on K and M on money

From: Gil Skillman (gskillman@mail.wesleyan.edu)
Date: Thu Jul 25 2002 - 15:39:34 EDT

```Andrew writes

>Hello Gil and Rakesh.
>I am coming in late here on this one, but is it not wise to distinguish
>between quantity and price systems in a Sraffian, or any, framework. Sraffa
>assumes the quantity of output is given and looks at prices and
>distribution.

Not only wise, but necessary.  In the standard representation I've been
discussing so far, constant returns to scale (the case most favorable to
labor value theory, for reasons I discussed on OPE-L long ago in the
context of KIII, Ch. 10) are assumed, which implies that quantity levels
factor out of the price of production equations, assuming commodity
money.  If you assume fiat money and want to discuss the connection between
money supply and prices, you may need to introduce the quantity equation MV
= PQ, which means that quantities have to be brought back in (I was saving
this step until Fred had a chance to reply to my scenario involving
quantity money).

>  But a quantity model can also look at the scale of output,
>which is where money comes in through the impact of investment on
>quantities, through a Kalecki type multiplier (or as is fashionable the
>supermultiplier). These quantity relationships could hold regardless of
>whether prices are sequential or simultaneous.
>
>You can either look at an input-output table vertically, in which case
>quantities are cancelled out, or horizontally in which case prices are
>cancelled out.

I can't quite translate this comment.  Strictly speaking, prices won't show
up in an input-output table. And even if we adduce prices to convert such a
table to a system of prices of production equations, I don't yet see the
sense in which prices might be "cancelled out."

>Both dimensions can be explored separately in a Sraffian
>system. (If we determine quantities and prices together then isn't this what
>the neoclassics do with their demand and supply diagram?)

Indeed so.  But to do this in a Sraffian framework you'd have to add demand
functions, something that Sraffa was trying to avoid.

Gil

>Let me know if this makes any sense.
>
>Andrew (Trigg)
>
> > -----Original Message-----
> > From: Gil Skillman [SMTP:gskillman@mail.wesleyan.edu]
> > Sent: 19 July 2002 20:08
> > To:   ope-l@galaxy.csuchico.edu
> > Subject:      [OPE-L:7432] Re: Re: Re Aoki on K and M on money
> >
> > Rakesh, you write
> >
> >
> >
> >       re 7430
> >
> >       Hi Gil,
> >       Money can have no other role than numeraire in a system of
> > simultaneous equations.
> >
> >
> > As I think Gary mentioned earlier, there is a potential equivocation here
> > with respect to the term "simultaneous."  It's true that the standard
> > Sraffian framework involves a system of equations that might be solved
> > "simultaneously" to yield values for some subset of prices of production,
> > profit rate, and wage rate.  It does not follow, however, that the
> > equations in this system must represent economic processes that *occur*
> > simultaneously.  Quite to the contrary, it is possible (and has been done)
> > to introduce time-specific variables in the Sraffian framework, which
> > among other things makes it possible to reflect the function of money as a
> > store of value--making it more than simply a numeraire good.
> >
> >
> >
> >       (1) The equation for money appears alongside all the other
> > commodities in such a formalization, and  the contradiction between
> > commdities on one side and money on the other is thereby elided. But this
> > is the basic abstraction of a monetary production economy. It is an
> > emasculation of of Marx's theory of money to treat it as any other
> > commodity except that it alone is set to equal one in an algebraic
> > solution.
> >
> >
> >
> > No more than it is an "emasculation of Marx's theory" to posit that
> > commodities exchange at their respective values--a condition he clearly
> > rejects as empirically descriptive or analytically general yet imposes as
> > of the end of KI Ch. 5--or that workers are necessarily paid a wage
> > corresponding to the value of labor power--a condition he assumes
> > beginning in Ch. 6 but subsequently relaxes in his analysis of capitalist
> > accumulation in Ch. 25.  The point is that these additional aspects of
> > money are simply *not at issue,* and thus *nowhere invoked,* at the level
> > of abstraction pursued by Marx in KIII Ch. 9, to which the Sraffian
> > analysis most directly speaks.
> >
> >
> >
> >
> >       (2) Once one has put himself in the simultaneous straightjacket, it
> > seems impossible to make a logical transition to a level of abstraction in
> > which the features of money which are temporally based can be assimilated.
> > Through the introduction of money even C-M-C separates sale and purchase
> > by time. But there is no time in the Sraffian formalization and thus there
> > is no capitalism. The formalization thus does not capture the essential
> > features of its purported object.
> >
> >
> > I believe this claim is built on the confusion between mathematical and
> > temporal simultaneity noted above.  It *is* possible to introduce time in
> > the Sraffian formalization, and indeed has been done.  Thus, if one were
> > to read Marx in KIII, Ch. 9, as insisting that output prices were
> > determined "later" than input prices for the corresponding goods, and were
> > thus generally unequal to them, this complication could readily be
> > incorporated into the Sraffian framework.  But I don't think he insists on
> > this.
> >
> >
> >
> >
> >       For these reasons, I am sympathetic to the TSS interpretation in
> > which the givens are in the form of money and all variables are time
> > subscripted. There then seem to be no logical problems in moving to what
> > we are calling other levels of abstraction. Of course I wish the TSS
> > members were present here to continue this argument at the level of
> > sophistication which it deserves.
> >
> >
> > Fair enough.  I'll just note again that there is absolutely no barrier to
> > time-subscripting variables in the Sraffian framework.
> >
> >
> >
> >       I shall not re-engage your ch 5 criticism (which I had recently
> > mentioned) except to say that we are both agreed that putting out
> > manufacture can be a form of surplus value production. By the way there is
> > an important exchange between Michael Zmolek and Robert Albritton about
> > putting out mfg in recent issues of the Journal of Peasant Studies.
> >
> >
> > Interesting.  If you have a moment, could you summarize the key point or
> > points at issue in that exchange?
> >
> >
> >
> >       Needless to say, I don't believe there is a transformation problem
> > which requires the money-less, atemporal Sraffian formalization to solve.
> >
> >
> >
> > Perhaps, but as I read it the discussion between Gary and Fred involves a
> > narrower question:  is it logically coherent, in general, to insist that
> > the rate of profit is determined analytically *prior* to prices of
> > production?  And one can use a Sraffian formalization *with* money, that
> > is no more or less explicitly temporal than Marx's analysis in KIII, Ch.
> > 9, to establish that this claim is *not* logically consistent in general.
> > To put the point another way, since Marx nowhere *rules out* the
> > possibility of a steady state in which respective input and output prices
> > are equal, even if temporally separated, this Sraffian demonstration is
> > unavoidably relevant to Marx's--and Fred's--categorical claims.
> >
> > Gil
> >
> >
> >
> >
> >       Yours, Rakesh
> >
> >
> >
> >
> >               Rakesh, thanks for bringing the Aoki article to my
> > attention.  I hadn't known about the 1933 MS of Keynes's theory, and found
> > Aoki's discussion of the overlaps and contrasts with Marx quite
> > interesting.  But for what it's worth, so far as I can see nothing Aoki
> > wrote suggests a refutation of my earlier comments on the applicability of
> > Sraffa to Marx, **at the level of abstraction at which Sraffian analysis
> > engages Marx's analysis.**  Aoki notes that both Marx and Keynes
> > understand money to play a more complex role in a capitalist economy than
> > simply serving as a medium of exchange, and that this more complex role
> > allows for the possibility of capitalist crisis.
> >
> >               But first, none of these more complex aspects of money are
> > at issue in the portion of Marx's analysis under discussion with Gary and
> > Fred, roughly corresponding to Marx's argument in KIII, Ch. 9.  I might
> > add, in anticipation of what follows, that nor are these more complex
> > aspects of money at issue in Marx's analysis of the "contradictions" in
> > the circuit of capital in KI, Ch. 5. If you allow  Marx to abstract from
> > these complexities at this stage, then it seems to me a similar latitude
> > should be allowed to the Sraffian framework when it addresses the same set
> > of questions at the same level of generality.  Second, I see no evident
> > impediment to incorporating the more complex functions of money in a
> > Sraffian framework if this is called for in some more all-encompassing
> > abstraction of capitalist processes, and see no reason to believe that
> > doing so would reverse the valid indictments of Marx's analysis made
> > possible by the Sraffian framework.
> >
> >
> >                       My argument with Gil has been that Marx is not
> > attempting a logical transition from simple commodity production to wage
> > labor relations of production in chapters five and six.
> >
> >
> >               It would be pointless to re-engage this argument, but I will
> > just note for the record that contrary to your claim here I never argued
> > that Marx is attempting such a logical transition.  My main point is that
> > (whether or not you understand Marx to be positing a fully elaborated
> > capitalist economy at every step of his argument in KI, Part 2), Marx
> > explicitly developed logical basis for invoking *price-value
> > proportionality* (i.e. the analytical hypothesis that commodities exchange
> > at their respective values) as the necessary theoretical starting point
> > for analyzing surplus value is (1) evidently invalid, involving a
> > fallacious inference about necessary conditions from a premise concerning
> > sufficient conditions; (2) contradicted by at least one version of the
> > circuit of capital that meets all of Marx's conditions for the existence
> > of surplus value; and (3) essentially misleading about the systemic
> > conditions that make it possible for capitalists to appropriate surplus
> > value.
> >
> >               But other than noting what my real argument on this point is
> > for the record, I don't mean to pursue this critique further in this
> > forum.  There is a very different set of questions at stake in the
> > exchange between Fred and Gary.
> >
> >               Gil
> >
```

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