Re: [OPE-L] naive question on Sraffian model

From: Ian Wright (iwright@GMAIL.COM)
Date: Thu Dec 02 2004 - 13:11:55 EST

Dear Riccardo, Anders etc.,
Thanks for taking the time to respond to my question. I found a review
essay in Review of Political Economy Vol 16 No 2: "Sraffian research
programmes and unorthodox economics" by T. Aspromourgos. Quoting:

"Two possible alternative `closures' of the distribution system -- via
the accumulation rate or via the rate of interest -- have also been
systematically pursued, especially the former route. The essential
basis of the former is that given the equilibrium equality between
saving and investment, an equality can be postulated between the
ratios of saving to the value of the capital stock, and investment to
capital. If the latter ratio could be conceived of as an independently
determined rate of accumulation, and the former decomposed into a
distribution-weighted average of saving out of each functional income
category, in a ratio to capital, then a causation from accumulation to
distribution could be posited -- the 'Cambridge Growth Equation'
causation. On the other hand, the essential insight of the interest
closure approach is that given the equalization of interest rates and
profit rates (net of compensation for differential asset
characteristics such as illiquidity and risk), if profit rates are
free to vary in equilibrium, at least within limits, and interest can
be independently determined in money markets -- including, in the
latter determination, central bank behaviour (monetary policy) -- then
a monetary determination of profit rates, and hence income
distribution more widely, can be posited. The absence, so far, of a
more considerable development of this latter programme is the most
unfortunate omission from the Sraffian project as a whole -- although
further development of it properly should not amount to another theory
of profit rate determination, different from the Cambridge Growth
Equation, but similarly mechanical and indifferent to the role of
wider social forces. ... So long as only one degree of freedom is
available for determining distribution, both of these approaches
cannot be sound. ..."

The Cabridge Growth Equation causation sounds very complicated! ...
For what it's worth, the last sentence is another example of the
fallacy of non-contradiction (positivist habit): it assumes that there
cannot be multiple mechanisms that simultaneously function to attain
contradictory ends (e.g., distribution). Anders, I think it is
important to close the model and not leave distribution to unmodelled
notions of class conflict, particularly as empirically it seems that
distribution is pretty much constant, but it is technology that
changes over time (which is the inverse of the Sraffian model that
assumes fixed technology and investigates the effect of changing the
distributional variables).


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