Re: (OPE-L) Ajit's paper

From: Rakesh Bhandari (rakeshb@STANFORD.EDU)
Date: Thu May 27 2004 - 14:35:10 EDT

I look forward to reading your paper (and there is the one in Westra,
et al.). A few quick points.

1. The money commodity should not be treated as any other commodity
in a set of simultaneous equation: more than the the average rate of
profit will tend to be secured in this branch (see Michelle Naples on
absolute rent in the precious metal sector), and there is no
mechanism by which to affect supply such that the average rate of
profit will have been made in the "money branch" over the long term
(see my OPE-L posts, based on my reading of Ricardo and Malthus:;
Fred Moseley has of course written on this (see his website).

2. I read the paper a long time ago, and just skimmed it.  Sen makes
a good point. Sraffa's demonstration deals a blow to the parables
taught in introductory economics, but it should not  be understood as
a theory of the actual determination of output, prices and the profit
rate or as a method for calculating on the basis of given physical
data and a distributional parameter what equilibrium prices actually
are. The equations have no such real world predictive value.  He also
reiterates from his late 70s CJEd piece th distinction between
mathematical and real determination but seems to have an allergy to
Marxian value theorists, so does not cite Shaikh on the matter. If
understood outside its context, the Sraffian equations appear an arid
formalism because there is no way to introduce money and dynamics
into them (that's how I would put it); but if one understands the
purpose of the equations to be a Gramscian critique of popular
ideology, then they serve their function.

3. Whether one wants to dismiss marginal utility theory on the basis
of an positivistically illicit use of counterfactuals, the underlying
realities on which Marx's theory of value is based are not

4. While Hahn questions the assumption of input and output prices as
equal in order to enter demand considerations to close the equations,
Giusanni, Freeman and others question that assumption in order to put
technical change into the formalism. That seems to me to be the real
fight--about how and why to drop the static assumption in the
Sraffian formalism when it comes to studying actual capitalist
economies, ie. when one is doing more than critiquing popular
mythology about the productivity of capital and profit as just
reward. Sen implicitly recognizes Hahn's point but pays no attention
to the Marxian criticism. But that's where the action is.


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