From: Ian Wright (iwright@GMAIL.COM)
Date: Mon Jun 07 2004 - 18:10:04 EDT
Hi Ajit I'm happy to discuss, time permitting, the merits, or lack of them, of economic theories that take prices in a previous period as a parameter, as some particular TSS models do. But I was originally concerned to refute: > But these prices are determined by the determinants other > than prices. That's why it qualifies to be a theory of prices. If > they determined prices of a commodity in time t on the basis > of observed prices of the same commodity in time t-1, then it > would not be a theory of prices but rather be simple > mumbo-jumbo, which is what TSS is. because this amounts to a rejection of the coherence of temporal theories of price, a stronger and more basic criticism, and one that, in my opinion, represents a barrier to a full understanding of the function of price and the meaning of value. I have tried to explain that your epistemological claim of what necessarily constitutes a theory of price is in fact an unacknowledged ontological claim -- because it denies, without justification, the empirical possibility that prices affect prices. If it is the case that prices affect prices then a static price theory that makes no reference to previous prices misses a determining factor. Hence, it is an incomplete theory of prices. It is possible to deny that price affects price in reality, but it is not possible to deny this as a methodological principle. Whether a price theory can be considered complete or not is ultimately an empirical question. It certainly cannot be decided on only logical or analytic grounds. For example, I think a complete theory of price will have precisely that feature you label "mumbo-jumbo". More generally, I think this points to deeper philosophical differences, which I find very interesting. For example, the reduction of ontology to epistemology is a characteristic feature of philosophical positivism, as identified by Bhaskar. I think your methodological requirement for a price theory is an example of such a reduction. Another feature of positivism is the tendency to reduce mechanisms to events, which can manifest as a denial that events can be either over- or under-determined. For example, in the literature on the transformation problem, it is assumed, again without justification, that if the law of value and the law of equal profits are contradictory then one of those principles must be rejected (usually the law of value). It is incorrectly deduced from the logical requirement that events be simultaneously consistent that there cannot be underlying mechanisms that generate those events that are simultaneously inconsistent. It is analogous to inferring from the observation that two teams cannot simultaneously win a game of tug-of-war that one of those teams cannot exist, and then asserting that a complete model of the situation is the static equilibrium state in which a single team has won. This marvellous non-sequitur is committed by those who criticise Marx for logical inconsistency. It is a deep and seemingly pervasive philosophical error, maybe deserving of a name, such as the fallacy of non-contradiction. (For if the law of value and the law of equal profits are contradictory mechanisms then reality is simply overdetermined and the sequence of events that in fact obtain are a result of their mutual interaction in time.) So the influence of positivism seems to be quite pervasive and unhelpful in economics. I am sure there are more examples of this kind of thing. But a price theory that takes prior prices as a parameter is also an incomplete theory of price, which is the rational ground of your initial objection. I think you should label price theories that take price as a parameter as incomplete, rather than incoherent. I understood you to be claiming that a dynamic theory that includes previous prices as a determining factor for current prices is not a theory of price. I have pointed out that if price affects price than a complete price theory must have this feature, and this pattern is found in other models in other scientific domains, such as evolution and many kinds of feedback control systems. I am less interested in debating the details of particular TSS theories. I am more concerned to explain the necessity of dynamic models for a complete understanding of the meaning of price and value. I have enjoyed our discussion and have learnt from your very valuable criticisms. ATB, -Ian.
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