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

From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Fri Jun 09 2006 - 05:31:26 EDT


You are unfortunately still mixing up a price with a quantity. The
price of money-capital, like any other price, has nothing to do with
time, but the quantity of money-capital supplied and the profit income
received of course does.

> Note that this does not imply that a capitalist can supply
> money-capital for a nanosecond and receive its price.
> --------------
> Paul
> At this point you are surely conceding that what you call
> the price of money capital has dimension t^-1
> ------------------

No. Here I am talking about a quantity of money-capital not the price of it.

Ian you have to be aware that you are introducing some new and
unfamiliar meanings to terms here. The normal definition of a quantity
of money capital is just X pounds  not X pounds for Y years.
If you define capital as value / time, you are using the term
in a way that is quite unconventional, and probably incompatible
with your definition of commodity capital. It looks to me as
if when faced with a problem about the 'price of money capital'
you are redefining capital so as to make interest a price.

Note the implication here value = persons * hours so persons * hours/years
= persons/2000 which means that capital is defined in terms of
fractions of a person. This only makes sense when dealing with
the flow composition of national output, it does not make sense
when dealing with capital stocks.

> --------------------------
> Continuing with the dimensional analysis: in Sraffa's model quantities
> are measured in units of commodity-type. So quantities of the
> money-capital commodity are measured in money units. If we wish to be
> explicit about the length of time represented by the production period
> then the dimensions are money units per unit of time.
> ---------------
> Paul
> No this is not right. The production rates are in units of tons
> of corn per year. The prices are in oz of gold per ton of corn.
> The revenue flow from sales is tons of corn /year x oz gold / ton corn
> and hence oz gold per year.

Replace gold with "money units" and you are re-stating my paragraph.
It is not clear to me which part of my paragraph you thought was not

Also, there isn't a money-commodity, such as a gold sector, in the
circular flow. Introducing one would be an interesting exercise.

If there is no money commodity how are you able to talk of 
money capital?


The profit income doubles. The rate of profit, ie. the price, stays
the same. You need to distinguish between the rate of profit and the
receipt of profit income from quantities of money-capital supplied, a
price from a quantity.

I provided a simple dimensional analysis. If there was a problem, you
should have been able to point to it.

> It is important to distinguish the flow rate of profit from the
> stock rate of profit.

Not in Sraffian single production, in which there are no stocks that
exist across production periods. This is an extraneous matter given
the model type we are discussing.

This all stems from your taking a quite different dimension for
capital than I and almost all other Marxian economists do.
We generally treat capital as being a stock of money, or 
convert it using the MELT to a quantity of person hours.

You treat capital as a flow. This is quite contrary to
the whole historical background which gave rise to the debate
on the transformation problem. In Ricardo the problem was
to explain why things like wine put away to mature rose
in price compared to this years wine. The argument was that
the wine represented a stock of value which had to earn
a return similar to the general rate of profit or rate
of interest. It has generally been assumed that in dealing
with the transformation problem one has to deal with stocks
of fixed capital. Sraffa certainly recognises this and that
is why he goes on to introduce joint production. That is
the means by which stocks can be represented in his system.

>>  In the circular flow model there is both working-capital and  
>> commodity-capital. However, there is not an identifiable "point in  
>> time" when a firm both owns the working-capital and the  
>> commodity-capital that was bought with it. That would not make any  
>> sense.

> The point is that each capitalist is both a buyer and a seller.
> If one capitalist buys inputs another sells them, on average
> they are all buying and selling at the same time. The rate will
> be stochastic, the deviations in cash balances from the mean
> will be subject to noise with a Poisson spectrum.

I'm sorry but I have to say that this is mumbo-jumbo in the context of
the original point.

What I am trying to say Ian is that the time step analysis of Sraffa
is an approximation to a continuous flow analysis as one decreases
the size of the timestep. If one accepts that, then one can 'stop
the clock' at any point in the process and get approximately the same
picture subject to stochastic noise. In accountancy practice, this
'stopping of the clock' is done annually or quarterly. 
If one looks at the accounts of a firm at any such instant, their
capital account breaks up into a number of categories per example:

                                Assets                      Liabilities

Fixed capital                   £10,000,000
Stocks of raw materials         £ 1,000,000
Stocks of work in progress      £   500,000
Cash                            £ 2,000,000
Payments due for goods
delivered                       £ 3,000,000
Payments due for goods
received                                                   £ 3,100,000
Net assets                      £13,400,000

The firms need to keep a part of their capital as money capital
in order to buffer themselves for the variation in times at which
bills fall due. If profit equalisation occurred, which of course
I donít accept, but if it did, then the firm will want to earn
say 10% on its full £13,400,000. Sraffa, advisedly I think, did
not introduce the concept of money capital to his analysis. You
are explicitly doing so, in that case it has to appear in
your accounts. You say: <<there is not an identifiable "point in  
 time" when a firm both owns the working-capital and the  
 commodity-capital that was bought with it.>>
 At all identifiable points in
time  firms hold both cash and commodities. The money 
never goes away, it is conserved. It may move from one firm
to another, but it never vanishes. If you are drawing up profit
equalising accounts that money capital has to appear somewhere.
You can not invoke money capital as a concept and then
omit it from your accounts.

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