# Re: [OPE-L] SV: [OPE-L] what is irrational in the functioning of capitalism?

From: ajit sinha (sinha_a99@YAHOO.COM)
Date: Sat Dec 02 2006 - 11:15:13 EST

```--- clyder@GN.APC.ORG wrote:

> Quoting ajit sinha <sinha_a99@YAHOO.COM>:
>
> > >
> > > It is clearly not large in the normal sense of
> the
> > > word - employing lots of people.
> > ______________________________
> > Paul, which economy is larger today: US or Indian?
> > Most of the people hold that it is the US economy.
> > Why? Because it employs more workers than the
> Indian
> > economy? Obviously your definition is not shared
> by
> > most.
> > _____________________________
>
> This is because the labour of an average indian
> counts
> as less than that of the average american. The
> amount
> of labour time spent producing things in India being
> generally higher, only a fraction of it is socially
> necessary. Thus in terms of socially necessary
> labour ( on the global level ) the US economy is
> bigger.
______________________
Okay, a quick response, Paul. So now its not workers
but socially necessary labor. But how do you calculate
the socially necessary labor? Let's say you claim that
20 hours of an Indian labor is equivalent to 1 hour of
an US labor. How do you arrive at this conclusion?
Well, let's say both Indian and the US firms are
producing the same thing and you find that the Indian
firm produces the same amount in physical terms in 20
hours of labor, which an American firm takes only one
hour to produce. Now let us suppose the Indian economy
uses 100 hours of its labor to produce 5 units of x.
You will say that by socially necessary labor-time
criterion, the size of the Indian economy is equal to
5 hours of labor. Now it is clear that to produce 5
units of x it will take exactly 5 hours of Amerian
labor. Thus the two economies will be of exactly the
same size if the US economy also produced 5 units of
x. Now, for the US economy to be bigger than Indian
Economy by your measure of socially necessary labor,
it must produce more than 5 units of x. Which is what
my criteria in the first place suggested. You are
simply running in a circle. If the Indian economy and
the US economy are producing different physical goods
then the measurement of socially necessary labor must
go through their prices and exchange rates first, and
your circular reasoning in this case become even more
obvious.
____________________________
>
>
> >
> > >
> > >  Counter factual because we know
> > > that the
> > > range of variation of rates of surplus value is
> > > actually quite
> > > small say 60% to 200% in current capitalist
> > > economies. This
> > > also appears to be stable over long historical
> > > periods.
> > ____________________________
> Ajit
> > I think I have already answed to such arguments. I
> > don't want to keep repeating myself--it's tiring.
>
>   and then Later
>
> > How many times I have to say that my problem is
> not
> > empirical, it is logical. Cheers, ajit sinha
> > >
> -------------------
> Paul
>
> I dont think one can be so dismissive of the
> empirical.
> You have to explain why the labour theory of value,
> if
> wrong, gives the correct predictions. Why else is
> the
> rate of profit lower in sectors with a high organic
> composition?
_______________________
Statistics cannot give you more than corelation and
corelation can be accidental. But I do not need to
explain these corelation (and to what extent the data
is reliable to be accepted as correct observation)
because I don't work in this area. But just for
curiosity, have you tried the same exercise with oil
or some other basic input used in lare proportion?
____________________________
>
> It follows directly from the labour theory of value
> but it is incomprehensible starting from Sraffa for
> example.
________________________
It does not follow from labor theory of value at all.
To say that prices will be proportional to labor
content is not a theory but just an assertion. For it
to be a theory, one will have to explain why? Marx
thought that empirical prices were different from
prices of production and prices of production were
different from labor-values. And he had a theory that
explained why they were different.
__________________________
>
> Science has first to account for what happens.
> Logical consistency
> in a theory that makes the wrong predictions does
> not help.
> The fault of Sraffa's theory is not logical
> consistency
> which is fine, it is that it makes counter factual
> assumptions.
____________________________
Sraffa's theory does not make any prediction because
it is a description of what prices are and not a
theory to predict prices. And Sraffa does not make any
counter factual argument or "assumptions". Amartya Sen
had correctly pointed this out in his 1978 CJE paper,
if I remember the date correctly. Now, back to work!
Cheers, ajit sinha

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```

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