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

From: Ian Hunt (ian.hunt@FLINDERS.EDU.AU)
Date: Mon Oct 03 2005 - 19:26:27 EDT

Dear Ian,
Thanks for putting the point I was trying to make but lots more
thoroughly and clearly. I think joint products also point to the
solution you mention, namely that conditions of production and the
real wage do not on their own determine prices.

>Hi Allin,
>Before talking of "beans" again, I just want to reiterate that the
>problem can arise with an arbitrary number of commodities, because
>the difficulty arises from the existence of self-reproducing
>non-basic systems, of which there are arbitrary hierarchies (image a
>stack of russian dolls). The case of a single self-reproducing
>non-basic commodity, such as "beans", is a special and simple case,
>used for ease of exposition.
>Plus, the lack of a clear criteria for classifying goods consumed by
>workers as being "necessary", and hence basic, or part of the
>"surplus", and hence potentially non-basic, means that the number of
>commodities with undetermined prices is essentially arbitrary. We
>cannot say that the problem only affects a small number, or even a
>clearly defined number, of commodities.
>Sraffa points out that one can 'solve' the SRNB problem if one is
>willing to assume that the commodity in question fetches a price as
>output that is greater than its price as input (for then its rate
>of profit, which is presumed to be limited below that determined
>within the basic sector, can be jacked up).  This is of course
>contrary to the usual Sraffian idea -- but it seems to me it's a
>temporary concession.
>Yes, but there's a twist. Sraffa wants to investigate uniform prices
>and uniform profit rates. He knows that  beans cannot fulfill these
>conditions. So Sraffa argues that a producer of beans can fulfill
>these conditions if beans are sold at a higher output price than the
>input price attributed to them as means of production "in his
>So in order to maintain the importance of the distinction between
>basic and non-basic commodities, Sraffa is forced to consider
>differentials in input and output prices for a whole class of
>commodities. He tries to avoid the disequilibrium consequences by
>restricting the differentials to book-keeping operations that do not
>have real effects. This dodges the problem by literally "cooking the
>books" in the local industry.
>Sraffa had some early exchanges with the mathematician Newman on
>this. Newman was concerned.
>Kurz & Salvadori make the following observation: "beans producers
>would prefer to sell the whole harvest at the market to enter into
>another business, whereas nobody can enter into the beans industry
>because if somebody did, he would have to buy beans at the market
>price, that is, at a higher price than the one he could attribute to
>them as means of production".
>Sraffa's solution is a non-starter, and is generally recognised as such.
>The implication -- if I'm understanding this right -- is that the
>price of such a commodity must rise continuously relative to the
>general run of commodities.  But then, surely, before long it prices
>itself out of the market.  Demand goes to zero and it's no longer
>produced.  Since it's not a basic, there are no repercussions.
>The implication is that the Sraffian price equation is incomplete as
>it stands. K&S do begin to introduce short-period demand/supply
>considerations to try and work around the problem. OK, that's one
>route, although the results have their own difficulties, which we
>can go into.
>But I entered the Sraffian world under the impression that the
>single-product Sraffian price equation determines prices once the
>real wage is specified and hence was a complete theory of price that
>did not need the detour to labour values. For example, a quote from
>Steedman's classic critique of Marxian value theory: "... the rate
>of profit is fully determined by the real wage and the available
>methods of production, as are the prices of production ..." But this
>is not the case, unless the methods of production specified in the
>input-ouput matrix satisfy a particular mathematical condition that
>lacks an economic justification.

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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