Ted
--- >Fred,--Andrew and I have repeatedly stated that we are satisfied with Marx's >one period demonstration of the transformation of values into prices of >production. In our own interpretation, each period is complete, has an equal >rate of profit, and the basic equalities of total value and price as well as >total profit and total surplus value hold.Paul C ------ Clearly if you allow input and output prices to differ, your equations acquire sufficient additional degrees of freedom for you to be able to impose the constraints that you wish. The question is whether this system of equations has greater or lesser economic plausibility than the standard interpretation. If it has less plausibility, then your defence of Marx's consistency comes at the cost of his validity as an economic theorist.
I believe that any theory that assumes an equalised profit rate is unrealistic, but, given that you are trying to give an interpretation of Marx's price of production theory, you are forced, along with the Sraffians to accept this.
In the Sraffian system we have an explicit presentation of an equilibrium system, undergoing simple reproduction. In this context, the idea of an equalised profit rate may be a defensible hypothesis. The defence that the Sraffians would presumably put up would be that this was the fixed point of an iterative process involving movements of capital between branches of production.
In your case, you retain the equal rate of profit but abandon the equilibrium assumption. The question then arises as to how the firms are able, at each instant, to decide to set their output prices to be exactly those which yield an equal rate of profit?
I can see that you could hypothesise some sort of Kaleckian mark up pricing, where firms add a fixed percentage to their prime costs in setting prices. If I recall, Kalecki justified this with various assumptions about imperfect competition. Do you actually assume a Kaleckian price model? Paul Cockshott
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