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

From: Ian Hunt (ian.hunt@FLINDERS.EDU.AU)
Date: Mon Oct 03 2005 - 22:55:03 EDT

I should add that one of the solutions I had in mind, namely that
sale price could differ from input price, wrt which you point out
Kurz and Salvadori's problem that it would preclude entry to the
'beans' industry, could work if there were separate wholesale and
retail bean markets - but this would involve a significant departure
from Sraffa's assumption of homogenous products under competition,
On 04/10/2005, at 9:26 AM, Ian Hunt wrote:

> 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.
> Cheers,
> Ian
>> 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 book-keeping".
>> 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.
>> -Ian.
> --
> 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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