[OPE-L:2661] RE: multiple periods?

andrew kliman (Andrew_Kliman@msn.com)
Wed, 17 Jul 1996 06:36:22 -0700 (PDT)

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A reply to Fred's ope-l 2651:

Fred writes:

"the inequality of input prices and output prices in their [Kliman and
examples is NOT caused by input prices = market prices, NOR by past
technological change (the two new factors introduced by Andrew in his recent
posts); in their [prior, published] examples, input prices are equal to the
prices of
production of the previous period and technology is assumed to be constant."

Andrew: This is not factually accurate. Those particular examples assume
GIVEN input prices in the initial period that equal, not the prior period's
production prices, but static equilibrium "values."

"Rather, the inequality of input prices and output prices is caused by the
transformation of output prices."

Andrew: Again, this is not correct. The nonstationariness of prices is
"caused" by market prices that differ from productin prices, in these
particular examples. The market prices happen to equal static equilibrium
"values," not production prices. (This, however, does not mean that we begin
conceptually from static equilibrium "values." The initial conditions are
completely arbitrary.)

"Therefore, it cannot be legitimately
argued that the continuing changes in prices of production and the rate of
profit are caused by the inequality of input and output prices and not by
the transformation of output prices."

Andrew: Due to the above corrections of Fred's interpretation of our work,
this CAN be legitimately argued. And that's a good thing, because it is
true--as I've already argued twice in terms of the necessary and sufficient
conditions for changing production prices and the general profit rate.

"... in KM's examples, the inequality of output prices is not independent of
the transformation of output prices and cannot happen without the latter;
rather, it is caused by the latter."

Andrew: No, as I've just noted, the inequality of input and output prices in
these examples in caused by a previous inequality between input and output
prices (beginning in the initial period). Moreover, as I noted in my last
post, it is not valid to infer properties of our *interpretation* from the
properties of *examples* used to illustrate it, because the examples need
additional assumptions that are extraneous to the interpretation itself. So
please let's stop talking about particular examples and instead focus on the
interpretation. This is the only way I know to avoid invalid inferences from
mere coincidences.

Andrew Kliman