Re: [OPE-L] basics vs. non-basics

From: Ian Hunt (ian.hunt@FLINDERS.EDU.AU)
Date: Sun Sep 25 2005 - 20:54:15 EDT

Dear Ian,
Sorry, I meant, "why would the maximum rate of profit be set by the
natural reproduction rate of horses?"
I agree that the difficulty  is greater in a Sraffa style system
where the wage is part of a division of the net product. It is also
true that the standard commodity is developed is to show that the
maximum rate of profit is a dimensionless feature of the input-output
relations of the the industry producing the standard commodity. It is
not clear to me, though, that the maximum rate of profit of non-basic
industries is ever a dimensionless feature of the industry producing
the commodity, since their input-output matrices are never like that
of the standard commodity, which is a 'self-reproducing' commodity by
definition. Notionally, you could imagine an example where a
non-basic is like the standard commodity, but in this case (the
examples, even of 'beans', are not very realistic) assumption of a
uniform rate of profit would entail that the price of the output is
not determined by its cost of production. Maybe I am missing
something here...

>Hi Ian
>Before thinking about "race horses" I need to explain the full
>generality of the problem as described in the literature. I
>mentioned a single "self-reproducing non-basic", such as "beans",
>only for simplicity, and to follow Sraffa's original mention of the
>problem. But in general, if the maximum eigenvalue of the non-basic
>subsystem is less than that of the basic subsystem then
>"complications arise". In essence, this is the case when the
>limiting factor of the whole input-output structure is not a
>property of the basic subsystem, but the non-basic.
>So we don't need to identify a particular non-basic commodity that
>enters into its own production.
>On 9/22/05, Ian Hunt
><<>> wrote:
>  Clearly, a good deal of labour and other resources go into the
>production of racing horses - just ask the trainers. Production of
>race horse stock also requires much labour and resources - just ask
>the breeders.
>Yes, I agree. But Sraffa doesn't quite agree with us.
>For example, the surplus portion of the real wage consumed by the
>labour force that works in the production of racing horses is not
>counted as an indirect cost by Sraffa. So if workers consume "cake",
>and cake is a non-basic good, then cake is not considered as an
>input to the "race horse" sector.
>In these circumstances, why would the rate of profit in the industry
>be set by the natural reproduction rate of horses?
>It wouldn't. The rate of profit is assumed uniform and varies with
>the real wage. The rate of profit can range from zero to G, where G
>is the maximum growth rate of the basic sector. A problem arises
>when the maximum growth rate of the non-basic sector G* is less than
>G. For profit rates less than G* everything is ok. Speaking a little
>loosely, for profit rates equal to G* the price of non-basics is
>undetermined, for profit rates greater than G*, prices are negative.
>In this example, the natural reproduction rate of horses is a
>limiting factor on the amount of race horses that can be produced in
>a given period, i.e. it is a datum that determines G*.

Associate Professor Ian Hunt,
Dept  of Philosophy, School of Humanities,
Director, Centre for Applied Philosophy,
Flinders University of SA,
Humanities Building,
Bedford Park, SA, 5042,
Ph: (08) 8201 2054 Fax: (08) 8201 2784

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