[OPE-L:8614] Re: Re: long term centers of gravity?

From: rakeshb@stanford.edu
Date: Fri Mar 14 2003 - 13:09:28 EST

thanks Fred for your response in 8613: 

> 1.  You seem to interpret my use of the term "long-run"
> center-of-gravity
> prices to mean that these prices do not change for "long periods 
> time".  But that is not what I mean by "long-run". 

What I mean: over the long term most sectors will not have made 
much more or less than the average rate of profit. 

> I just mean that
> center-of-gravity prices CHANGE LESS FREQUENTLY than 
actual market
> prices.  

To guard against such fluctuations in spot markets, there are of 
course future markets. So I am wondering what happens to the 
analysis of market prices with the introduction of its two 
forms--spot and future markets. 

> Actual market prices are short-run prices that generally
> change
> every period, with the fluctuations of supply and demand. 
> Center-of-gravity 
> prices change only when there is a change in the productivity of
> labor (or
> the real wage), which occurs less frequently, at least in most
> industries. 

This is where we disagree. To the extent that an industry is made 
up of firms, which are changing the profile of their plants at 
different points and which are all continuously improving their 
organization in each of its plants,  productivity improvement is 
indeed much more frequent for the industry as a whole than you 
are allowing. 

I think Alan Freeman is able to capture such ceaseless productivity 
growth better with difference equations than his critics are with 
their simultaneous equations, though of course as Allin remarked 
difference equations are not suited to represent continuous 
productivity growth either. 

 In other words, long-run center-of-gravity prices change
> as a
> result of FUNDAMENTAL causes and less frequently, and 
> market
> prices change as a result of ACCIDENTAL causes and more 

I would agree of course that there are such fundamental changes 
in individual plants less frequently, but I am not sure this is true for 
the firm, much less the industry, as a whole.  And prices of 
production are of course sector wide prices. 

> I explain this in my paper on p. 3.
> Maybe the term "long-run" is misleading, and maybe I should 
drop it,
> but
> that is what I mean.  I do not mean that "long-run"
> center-of-gravity
> prices do not change over long-periods of time (although that 
> sometimes be the case).  

I am curious about which are possibly the industries in which their 
respective center of gravity prices may not change over a long 
period of time.

Gold extraction? Or in general those industries which produce 
commodities which are not truly freely reproducible? 

> Eatwell expresses a similar definition of "long-term" in the New
> Palgrave: 
> " `Long-period' does not mean a long period of time, but rather
> determined
> by the dominant forces of the system."  

In this system--the bourgeois mode of production-- the dominant 
forces are those of the forces of production, and they are in Marx's 
own words being continuously revolutionized. 

I am surprised Eatwell does not recognize this; didn't his co-author 
Joan Robinson express grave misgivings about long term and 
equilibrium thinking in the 70s? 

> 2.  We may have a possible disagreement over how fast 
> changes
> in individual industries, and thus how often center-of-gravity
> prices
> change, but that is not fundamental.  You seem to suggest that
> productivity is changing in all industries all the time.  I agree
> that, in
> the economy as a whole, productivity is changing all the time, but
> not in
> all industries at the same time.  There is probably a wide range 
> rates
> of productivity change across industries - with some industries 
> more
> frequent productivity change and other industries with less 

Yes we disagree: I think all this means is simply that the rate of 
productivity growth is different in different industries, and there 
could be various reasons for this: scientific possibility, strength of 
market demand, govt subsidy, strong competition from radically 
new products (sails don't have radical improvement until the 
steam ship comes along), etc. 

It simply does not follow from the fact of differences in sector 
productivity growth rates that productivity is only changing in the 
long term. 

>  In
> the 19th century, when Marx was writing, the rate of productivity
> change
> was probably slower than it is today.

Indeed. But Marx did forsee faster rates of productivity growth. As 
EA Wrigley has argued, It was Smith and Ricardo who were not 
fully confident that productiivty growth could become a permanent 
feature of capitalism; hence, the specter of the stationary state was 
never truly banished from classical thought.  

> However, this question of how often center-of-gravity prices 
> has no
> bearing on the concept of center-of-gravity prices itself.  
> Center-of-gravity prices are still prices that change only due to
> the fundamental cause of productivity change.  If productivity
> changes
> fairly frequently, and therefore center-of-gravity prices change
> fairly
> frequently, it is still true that center-of-gravity prices are prices
> that
> change only due to the fundamental cause of productivity 

No argument here! 

> More
> frequent productivity change certainly does NOT mean that there 
> CAUSE of changes of center-of-gravity prices - because input 
> are
> not equal to output prices, as in the TSS interpretation.
> 3.  It was not Allin , but John Ernst, who attempted to rescue KM's
> interpretation of the transformation problem with the argument of
> "lagged
> adjustment".  

Allin intervened as well, I am pretty sure. 

John argued that, although KM explicitly assume
> constant
> technology in their period of analysis, it is possible that
> technology
> changed before their period 0, and thus that the changes in 
> of
> production during their periods of analysis are the lagged effects 
> this
> earlier technological change.  
> But there is nothing like this "lagged adjustment" in Marx's texts. 
> Marx
> argued that when productivity changes, then the price of 
> would
> change in that period.  There is nothing about a one-time change 
> technology simultaneously in all industries setting off a series of
> subsequent changes in prices of production in later periods, 
> productivity remains constant.

That there is no such thing in Marx does not mean that in solving a 
problem which is not in Marx--completing the transformation in the 
framework of simple reproduction--KM have broken with the spirit 
of Marx. 

> KM's articles are about the transformation of values into prices of
> production, with productivity assumed constant.  To then later 
> that
> this transformation of values into prices of production was set off
> by a
> prior change of technology is bizarre, and has nothing to do with
> Marx's
> theory of prices of production.

Some allowance can be made for tweaking Marx here and there in 
solving a problem which he left open, though you have convinced 
me that Marx would not agreed that the transformation had to be 
completed by inclusion of the inputs.  But there is no reason why 
they could not say that their iteration is simply a lagged adjustment 
to a prior change in productivity.  That Andrew did not say this is of 
no import; he need not be his own best friend. 

But I am interested in neither defending nor criticizing KM. 

> 4.  I think you misinterpret Carchedi.  You say:
> "I am not interested in defending KM's version but rather (major
> aspects of) Carchedi's which you do not accept though Carchedi
> has prices of production for the inputs which differ from prices of
> production for the output for the sole reason that the productivity
> of
> labor changes interperiodically."
> I am not sure what you mean by "interperiodically"?  Between 

Well of course I mean that the inputs are produced under different 
productive conditions than the outputs are being produced.  
Carchedi takes this a reason not to solve the profit rate and prices 
simultaneously, as Bharadwaj and others recommend.  He does 
not think it makes sense to have the same prices for inputs and 
outputs. This is where he differs from you. But of course it leads 
him to break with linear production methods just as you have for 
other reasons. 

>  In
> any case, Carchedi assumes that when productivity changes in 
> production of an input within a given period, then the value
> transferred
> to the price of the output in that period will be the new price of
> the
> input, not the old price of the input, as in the TSS
> interpretation.  Carchedi says:
> "The value of A going into the value of B is not the value at which 
> has
> been bought at t1, but the value A has at time t2.  If, in this
> period, A
> has become either cheaper or more expensive, the value of B 
> accordingly be either reduced or increased."  (Frontiers of
> Political
> Economy, p. 93)
> In other words, the value transferred from A to B is revalued in
> that
> period as a result of productivity change in the production of A.  I
> agree
> with Carchedi.  This is what I have been arguing all along.  And 
> is
> different from the TSS interpretation on this crucial point.  

Yes but how is the rate of profit determined for the firm in which its 
inputs have been devalued? 

thanks for your reply,

> I have to run now, but I look forward to your response and to
> further
> discussion.
> Comradely,
> Fred

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