Re: [OPE-L] standard commodity

From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Mon Mar 14 2005 - 17:43:11 EST

I agree that the result that relative directions of price change
after technical change vary with the numeraire are not all that
surprising if your view of production has been formed by Sraffa,
which for all of us is probably true. Since Sraffa, most Marxist
economists are used to thinking of production in matrix terms.

As I understand it from Ajit though, it is less than obvious in
neo-classical theory, and thus shows a potential inconsistency in
their treatment of technical change.

-----Original Message-----
From: OPE-L [mailto:OPE-L@SUS.CSUCHICO.EDU] On Behalf Of Andrew Brown
Sent: 14 March 2005 12:35
Subject: Re: [OPE-L] standard commodity

Full reply as promised.
The conclusion to your paper, with Paul C., stresses that the
comparision between values before and after technical change is
impossible, or better still, meaningless (analogous to comparison
between language games for Wittgenstein). But this result is obvious,
given the general case of technical change, where a new (basic) good is
introduced and hence the respective price vectors, before and after
technical change, are incommensurable. I simply do not see what is so
significant about showing incommensurability under the relatively
superfical special case where 'technical change' maintains qualitative
identity of all goods in the economy, merely involving new input or
output magnitudes. Why would Sraffa himself have bothered with such a
relatively trivial matter -- as part of his lifes work -- when the
general case is obvious and renders the intricacies of the trivial case,
indeed trivial (assuming, for sake of argument, your interpretation of
Sorry if the above is repeteting my earlier points -- and this is a sign
that out conversation may be about to stall -- but some annotated
comments below.
-----Original Message----- 
From: OPE-L on behalf of ajit sinha 
Sent: Fri 11/03/2005 13:07 
Subject: Re: [OPE-L] standard commodity

        --- Andrew Brown <A.Brown@LUBS.LEEDS.AC.UK> wrote:
        > Thanks Ajit,
        > I don't think economics can get very far without a
        > theory of value, and in point of fact well known
        > existing economic theories do have a theory of
        > value, hence the burden of argument would seem to be
        > on you to show us how economics can proceed absent a
        > theory of value. And I hope we agree that economics
        > is useless if it tells us nothing about reality
        > where change through time is axiomatic.
        I don't think the burden of argument can be on me.
        Let's suppose that I have convinced you that a theory
        of value cannot deal with changes in technology. Now
        if you think that without a theory of value one cannot
        do much in economics and economics must necessarily
        deal with changes in technology. Then you come to the
        conclusion that the project of economics as a
        scientific discipline must be abandoned. But then
        what's wrong with that? Why should there be a
        necessity that economics must be a scientific
        discipline? On the other hand I find that most of the
        schools of economic thinking except neoclassical
        economics and to some extent Marxian economics go
        about their business without caring about having a
        theory of value, which includes Keynes. Now to what
        extent their stories are coherent and how far they can
        go without a theory of value is something that needs
        to be looked into closely but there is no denying that
        they are able to say a lot of things economic in a
        reasonable way. I think what we need to put on the
        agenda is: why a theory of value is important to

        Well, the history of economic thought would seem to suggest that
value theory is central to economics. (We go from LTV through confused
eclectics like JS Mill to marginal revolution, after all). Keynes
clearly owes debt to marginalism. You ask 'what is wrong' with the
hypothetical case of all economics being useless? Answer:  it is helpful
to push the logic of an argument to show it leads to such a conclusion,
especially when one has on offer an alternative point of view that
suggests economics need not be useless. Turning to your point that 'on
the other hand' some economics seems to say sensible things then I
certainly deny that *useful* things can be said about the essence of
capitalism absent a value theory -- where an economic theory is useful
for long-run and system-wide issues concerning capitalism, and appears
to lack a value theory, then it unwittingly presupposes one, in my view.

        > You write:
        > The problem of
        > new machines etc. being produced is not a problem
        > within the context of a given system of basic goods.
        > All new goods including new kinds of machines are
        > non-basics for the given system of production.
        > Cheers,
        > ajit sinha
        > I reply: at best this remark seems to confirm the
        > point I was making. In the real world, 'technical
        > change' includes the introduction of a new machine
        > to the production process. Therefore (1) the correct
        > analysis (one which does not assume away the very
        > point at issue) of such technical change must be a
        > comparison between 2 different *basic* systems;
        Yes, but why comparison between two systems must imply
        comparison of prices in the two systems. One may be
        able to compare various other things without taking
        price comparisons into account.

        This leaves only a few ratios (e.g. proft rates; income shares)
available for comparison through time (I won't call them dimensionless
given Philip Dunn's recent post). These are the things to be explained
by economics and social theory and they defy explanation absent some
substance, homogenous through time and space, that can can plausibly be
considered to be manifested by them (or by the terms that constitute
them)-- this is the substance of value. Explanation of a quantity
generally requires reference to somehing that is quantiatively and
qualitatively related to the quantity in question. E.g. we explain
weight of a sack of potatoes as a function of the the number of potatoes
in the sack. 

        > the Okishio theorem tells us nothing about the
        > movement of the real world profit rate, in the face
        > of real word technical change;
        Let's leave Okishio theorem out because it is not
        relevant here. But in general, I do not think that
        there is such a thing like "real world". All real
        worlds are constructs of one kind or the other.

        I hope my meaning is clear, absent philosophical discussion of
'what is the "real world"?'  I mention the Okishio theorem because I am
puzzled as to why this theory is deemed to have any implication for the
rate of profit in the real capitalist economy, e.g. the implication that
the profit rate can only fall if real wages rise. Do you (or any one
else on this list who knows about such things) agree that the Okishio
theorem tells only about a pretty superifical case where 'techinical
change' involves only new combinations of given goods, rather than the
introduction of a new good (say, a new machine)? 


        (3) I remain puzzled
        > as to why you place so much stress on results that
        > you achive by entirely unrealistically holding the
        > set of (basic) goods qualitiatively identical
         -- the
        > fundamental limitation to economic science (and
        > value) that you wish to stress is surely given by
        > the point about real world technical change that I
        > am making?
        The theory basically needs only one basic good to work
        itself out. I don't think it is unrealistic from any
        kind of real world perspective. Most of the raw
        materials and food grains etc. are not changing
        qualitatively from one production period to another.

        I tried to answer this in my initial reply at the top of this


        (4) For my own part I believe the LTV is
        > essential precisely because it provides a common
        > substance and hence unit of value through real world
        > technical change (the *magnitide* of this substance
        > in any commodity changes, but the substance and unit
        > itself does not, through technical change).
        The problem with LTV is that one does not know what
        one means by it. Most of the people who are writing on
        LTV these days don't even know what theory stands for
        in LTV. For many of them LTV is like a circus animal,
        which does all kinds of tricks before your eyes.

        For me it is simply the view that prices have a systematic
relationship to labour times. It is not exactly proportional. It is not
ergodic. It is inexact and occurs only through the anarchy of
capitalistic production and exchange. But it exists and one can grasp
capitalism on this basis, and no other.

        Many thanks,




        > Your further thoughts on the above would be very
        > much apperciated. Specifically if I have got
        > something wrong I'd be very grateful if you could
        > explain why and how. I will otherwise remain
        > confused!
        > Many thanks,
        > Andy
        I have a feeling that I have made you even more
        confused. But talking to you is always a pleasure!
        Cheers, ajit sinha
        > --- Andrew Brown <A.Brown@LUBS.LEEDS.AC.UK> wrote:
        > > Thanks to Paul and Ajit,
        > >
        > > Have always been intrigued by Ajit's
        > interpretation
        > > of Sraffa (I speak
        > > as an interested layman on Sraffa). Paul, I did
        > not
        > > think you subscribed
        > > to Ajit's interpretation. I thought you held a
        > > labour theory of value. I
        > > thought that Ajit, by contrast, takes Sraffa to
        > show
        > > us that no theory
        > > of value, in any accepted sense, is possible (time
        > > -- technical change
        > > -- takes us from one 'system' to another,
        > analogous
        > > to moving from one
        > > 'language game' to another, hence rather disabling
        > > economic science).
        > > But the conclusion to this paper talks about a
        > > fundamental limitation on
        > > economic science as such, in line with Ajit's
        > view,
        > > thus I am puzzled
        > > that you (Paul) should subscribe to it. No doubt I
        > > have misinterpreted
        > > both of you - so apologies in advance for that...
        > >
        > > To my inexperienced mind, a more fundamental point
        > > than the one you make
        > > in this paper is that 'technical change', in the
        > > real world, involves
        > > change in the goods produced (e.g. a new machine).
        > > Given such a change,
        > > then you can't compare prices before and after
        > > change (as you do in the
        > > paper, by keeping the economy's goods
        > qualitatively
        > > identical) can you?
        > > Albeit this doesn't provide the immanent angle on
        > > general equilibrium
        > > theory, but perhaps it makes Ajit's point more
        > > forcefully, when it comes
        > > to practical (real world) considerations? Or, more
        > > likely, I have got
        > > something wrong somewhere.
        > >
        > > On a related aside, perhaps you can help me with
        > the
        > > following. The
        > > Okishio theorem tells us that viable technical
        > > changes cannot lower the
        > > rate of profit. But how can this tell us about
        > 'real
        > > world' technical
        > > change, where, say, a new good is introduced? As
        > far
        > > as I can see it can
        > > tell us nothing about such a case, but no doubt I
        > > have got all this
        > > horribly wrong (people as far apart as Steedman
        > and
        > > Fine seem to me to
        > > have stated that 'empirically' the rate of profit
        > > can only fall if real
        > > wages rise).
        > >
        > > Many thanks,
        > > Andy
        > >
        > >
        > >
        > >
        > >
        > >
        > >
        > >
        > > -----Original Message-----
        > > From: OPE-L [mailto:OPE-L@SUS.CSUCHICO.EDU] On
        > > Behalf Of Paul Cockshott
        > > Sent: 08 March 2005 12:08
        > > To: OPE-L@SUS.CSUCHICO.EDU
        > > Subject: [OPE-L] standard commodity
        > >
        > >  Ajit and I have written a paper on the
        > significance
        > > of the Standard
        > > commodity which, with Gerry's permission I am
        > > posting to the list.
        > >
        > > It is at:
        > > >
        > >
        > >
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