Re: [OPE-L] Ajit's Paper on Sraffa and Late Wittgenstein

From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Wed Jun 07 2006 - 05:19:57 EDT

However -- and this is important -- the firm revenue is transferred to
capitalist accounts. A part of this revenue is simultaneously returned
to firm accounts to serve as working capital. The net transfer is the
profit income.
That goes very much against what actually happens in capitalist
accounting practice. The gross revenue actually stays in the firms accounts
and portion of it then goes to the rentiers as dividends or interest.
We can interpret the equations to say that the working capital is at
the beginning of the period and the commodity-capital is at the end of
the period; or we can interpret it the other way around; or we can
interpret it as a simultaneous bi-directional flow of money and goods.
Ultimately this model is a simultaneous circular flow -- so you can
take your pick where you want to place your marker on the roundabout.

I would disagree, both coexist. There is a stock of commodity
capital and a simultaneous stock of money used to facilitate
the exchange of the commodity capital. If you introduce the
notion of money capital you have to account for it separately
as a distinct stock.


> They purchased it from other firms, so they collectively do
> not change their holdings of working money capital.

Agreed, under conditions of simple reproduction.

> The only possible change occurs as a weekly fluctuation of the relative
> cash balances of the working and capitalist class as a result
> of the weekly payment of wages, and its reflux during the week
> as workers buy consumer goods.
> Moreover, the amount of money working capital is undetermined
> by the equations, it depends on the velocity of circulation of
> money.

I think this is an interesting question and a topic for further work.
There are a number of ways to go in deducing the amount of money
required to circulate commodities in linear production systems. Andrew
Trigg has a good discussion on this topic in his yet to be published
book, "Marxian Reproduction Schema".

In a system without a money-commodity then "r" has dimensions $/$,
i.e. it is the price of money-capital per unit of money-capital
supplied. For example, if a capitalist receives a return of 0.5$ per
1$ supplied then r=0.5 $/$. In other words 1 unit of money-capital
costs r$.

$/$ is simply a dimensionless scalar. Profit is always  profit 
per unit time and expresses the exponential growth rate of capital
with respect to time. I don't see that this commits one to
an Austrian view.

> This dimensional difference indicates that the r can not be a price.

If there is a dimensional error in the circular flow then there is
necessarily a dimensional error in Sraffa's equations.

I said that the error was in the treatment of r as a price.
Sraffa does not do this.

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