Re: [OPE-L] equilibrium and simultaneous vs. sequential determination

From: Ian Hunt (ian.hunt@FLINDERS.EDU.AU)
Date: Sat Sep 15 2007 - 21:47:11 EDT

Dear Fred,
I am a bit puzzled by this: the Sraffians have a model of the profit
rate per 'year', with joint products dealing with inputs that are not
entirely 'consumed' in a 'year'. The 'year' can be set as the least
turnover period of capital to deal with variations of turnover
periods, where the turnover periods are less than an astronomical
year. You then have to calculate the annual rate of profit from the
rate of profit per 'year', which involves compounding the 'yearly'
rate of profit over the no of 'years' annually,

>Quoting Paul Cockshott <wpc@DCS.GLA.AC.UK>:
>>Sraffa would never have made the assumption that both A and B return
>>a profit of $50
>But if these two industries were part of a general system of equations
>in which the rate of profit was determined, then it would have to be
>assumed that these two industries have the same rate of profit, even
>though they have unequal turnover times, because only one rate of
>profit is determined for all industries.
>The only other option would be to assume that all turnover periods are
>the same, which is what Sraffa did (and the Sraffians do).  Since the
>rate of profit is the same for all industries, and the rate of profit
>is equalized over the equal periods of time, all industries must be
>assumed to have equal turnover times.
>>Hi Ajit,
>>What you continue to say about Ricardo and compound interest does not
>>answer my question about Sraffa's theory.
>>Assume that $200 is invested in industry A and industry B.  The $200 in
>>industry A is recovered in 12 months, plus a profit of $50, so that the
>>rate of profit for its turnover period is 25%, which is also the annual
>>rate of profit.
>>Assume that the $200 invested in industry B is recovered in 6 months,
>>also with a profit of $50.  So the rate of profit for its turnover
>>period is also 25%, but its annual rate of profit is 50% because it
>>turns over twice.
>>Please explain how compound interest solves this problem, i.e. how it
>>equalizes the annual rate of profit in these two industries with
>>unequal turnover periods.
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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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