[OPE-L:2470] Howard & King on stationary prices

akliman@acl.nyit.edu (akliman@acl.nyit.edu)
Tue, 4 Jun 1996 16:13:37 -0700

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From: HERA::AKLIMAN 31-MAY-1996 19:03:48.78
To: SMTP%"ope-l@anthrax.ecst.csu.chico"
Subj: Howard & King on stationary prices

Howard and King's _History of Marxian Economics_ is *extremely* critical
of Marx, especially his value theory. I think is is significant when
folks like that, certainly no TSSers, say the following very sensible
things about stationary prices (in their Vol. II, published 1992 by
Princeton Univ. Press, pp. 301-02):

"In general, [Frank] Hahn argues, profit-maximising activities will not be
compatible with equilibria as Sraffians imagine them: that is, including
an equalisation of the rate of profit on the reproduction price of capital
goods. Competitive equilibrium involves an equal rate of return on all
assets, but neoclassical theory recognises that only under particular
conditions will asset prices equal their costs of production.

[This should sound familiar to those who've followed the discussion about
whether the rate of profit in Marx's transformation account, as Ted and I
interpret it, is "really" an "equilibrium" rate.]

"One problem lies in Sraffa's assumption that a 'uniformity principle'
holds, where not only is the wage and rate of profit the same in all
processes, but the price of each commodity is identical irrespective
of whether it is an input or an output. Assuming competitive prices will
not ensure prices are stationary. ... if prices are unconstrained to
be uniform ..., specifying r and the numeraire is not sufficient to
determine either prices or the wage.

This particular cause of underdetermination also threatens the link
between profits and surplus. Output prices may differ from input prices
in such a way that a positive surplus is neither a necessary nor a
sufficient condition for positive profits. Thus the usefulness of
treating the economic system as involving reproduction and surplus
extraction is suspect, for neither concept may be linked to exchange
phenomena once the possibility of non-stationary prices is accepted.
Consequently, the vision of causation in surplus theory where production
and specific distributional relations completely determine exchange
relations is no longer a compelling one. This, in turn, questions the
particular applications of the materialist conception of history which
many theorists within the surplus tradition have made in order to
integrate their economics into a gneral social theory."

Good words, I think. THe strange thing is that H & K fail to realize
that Marx's value theory, the determination of value by labor-time,
supplies the determinants that are missing from the Sraffian system
once non-stationary prices are accepted. Even stranger is the fact
that they use stationary price models again and again and again in
their book in order to show Marx's "internal inconsistencies." Once
non-stationary prices are accepted, however, as they note, the models'
underdetermination do not let them demonstrate anything.

Andrew Kliman