Re: [OPE-L] standard commodity

From: ajit sinha (sinha_a99@YAHOO.COM)
Date: Thu Mar 24 2005 - 07:17:15 EST

--- Andrew Brown <A.Brown@LUBS.LEEDS.AC.UK> wrote:

> I reply: Your paper, in the conclusion, says that
> economic science as
> such is fundamentally limited (this is also what you
> say in your
> previous papers on Sraffa, and what intrigues me).
> This is more than an
> immanent critique of general equilibrium (unless you
> equate 'economic
> science' with 'general equilibrium theory'). It is
> on the terrain of
> this large claim of yours that I have been arguing.
> The object of both
> your claim and my response is the same: economic
> science. Thus we, of
> course, have the same *definition* of the numeraire
> but it is the
> *significance* of the numeraire to economic science,
> and indeed the
> significance of economic science, that is at issue.
Andrew, Look at the subtitle of Sraffa's book. It
says, "Prelude to a critique of economic theory". What
does he mean by "economic theory"? He means the
neoclassical economic theory because that is the
predominant economic theory of the time. Why do I say
"economic science"? It is because the neoclassical
economic theory is designed as science such as
physics. It works on functional relations that are
rooted in the notion of mechanical causality. One of
the points, which is very controversial and not
accepted by most of the Sraffians, that I'm making is
that Sraffa was attacking economics as science. In my
reading, he favored economic theory to be
"descriptive" rather than "predictive". That is what
I'm pointing to when I say the uniqueness of Standard
commodity shows the limitation of economic as science.
As a matter of fact, even Amartya Sen defends LTV only
from the descriptive perspective and not "predictive".

By the way, numeraire does not mean money. Sooner you
stop confusing the two, the clearer your theoretical
understanding of economics will become.

> You write: 'Yes, but the statement that it has "a
> positive
> relationship" does not make sense. First of all if
> value theory has to explain why 'one quarter of corn
> =
> x cwt. of iron', as Marx put it, then in that case
> the
> statement that labor and prices have positive
> relationship is meaningless. So you will have to say
> that well, 'value theory is not designed to solve
> the
> problem Marx posed for it. It is supposed to explain
> why one quarter of corn which used to exchange for x
> cwt. of iron, now exchanges for y cwt. of iron? And
> your statement means that in this case, the change
> in
> the prices can only be explained by changes in the
> labor values, i.e., if y is smaller than x, then the
> relative labor content of iron must have increased.
> This is the only meaning I can make of your positive
> relationship statement. So let's see how far your
> statement goes in this case. Now since Ricardo it is
> well known that the exchange ratio between corn and
> iron could change simply because the distribution of
> income between wages and profits changed without any
> change in the direct and indirect labor content of
> the
> two commodities. So what would your statement in
> this
> case mean? Where is the beef?'
> I reply: The answer to your question is that, as
> previously mentioned,
> there is not an exactly proportional relationship.
> Why not take Ricardo
> himself and say, following Stigler's mischievous
> interpretation, a
> correlation of 93 percent?

Andrew, you are not getting the point. The question of
proportionality does not arise here. What I'm saying
is that prices have changed but the labor content of
the two commodities has remained the same. In this
case where is the positive relationship? The
relationship is neither 93, nor 9 or 3 percent, it is
ZERO. So where does it leave your proposition. I'm not
interested in getting sidetracked by reference to
Stigler. I think he has misinterpreted Ricardo and I
have said that here and there in some footnotes. But
that's a separate issue.
> You continue, 'Now let me hummer you
> further. Let us suppose I assume that income
> distribution remains the same, then you would say
> that
> in this case the price change must have come about
> because of technical change and this price change is
> explained by the changes in labor values. But to
> establish any claim like that you will have to
> establish a relationship between labor-values and
> exchange rate to begin with, which your first
> statement logically cannot do. That's why I keep
> saying that to establish that labor-values explain
> the
> changes in prices you will first have to establish a
> relationship between labor-values and prices, which
> is
> the real question of the labor theory of value.
> There
> is no escape from it'.
> I reply: See above.

See above is nonsense! It is one thing to say that
changes in prices are of small magnitude due to
changes in distribution, where as changes in prices
are of large magnitude due to changes in labor content
on the basis of a theory that determines the relative
values of the commodities in the first place and
completely different thing to say that there is
positive relation between labor-time and price changes
without having a theory that determines the prices in
the first place.
> You write, 'as far as what I think about
> labor and all this--may be some other time'.
> Ajit this isn't fair!:) Come on, I've 'owned up'...
> what are your
> thoughts?

Well, they are available in public domain. You can
look at the entry on "labour theory of value" in
Readers' "Guide to Social Sciences" and also my paper
in 'Value and the World Economy Today', Westra and
Zuege (eds.). Cheers, ajit sinha

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