[OPE-L:2992] Re: Okishio and mathematical Economics

Stephen Cullenberg (Stephen.Cullenberg@ucr.edu)
Sun, 8 Sep 1996 16:13:04 -0700 (PDT)

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Here are some responses to Bruce, Paul and Andrew:

Part of a recent post I wrote made references to (a) calling the assumption
of an equal rate of profit (ERP) condition a "structural assumption," and
not understood as the outcome of a competitive process, a "dodge" and (b)
the fact that I think ERP conditions imply an appeal to methodological
individualism (whether that is good or bad is another matter).

Bruce responds to (1) by saying that he, or Marx, does not believe there is
an actual outcome of a competitive process resulting in a ERP condition.

>On the contrary, an actual situation in which profit rates are uniform
>across industries is not *the outcome* of any competitive process I am
>familiar with, in the real world or in Marx. Rates of profit are never
>actually uniform (even when we look only at the average rate within each
>industry); ...... (This is my own view, but it's also what I read Marx as
>saying.) So there's no "dodge" here--this particular non-existent situation
>is not *the outcome* of a process, it's precisely an *abstraction* from the
>actual outcomes that we might observe.

Well, who could disagree with the idea that profit rates don't _actually_
converge. But, presumbably, one assumes such a condition theoretically
because one has good reason to assume a "tendency" at least to such a
convergence. And, in the history of thought, Classical theorists and
Marshallians both (differently) invoke the idea of movement to
equalization. Of course, the Classicals used the notion of center of
gravity, and so too did Marx, btw. A simple question: How does the idea of
a center of gravity fit together with a "structural abstraction?"

I agree with Bruce that Marx is making different assumptions of what
exchange equivalence would imply in Vol I, and then Volume III. That was
not my point, but rather I was concerned with what is entailed by an
assumption of ERP about firm dynamics. One can't fault Marx for closing
his system with a commonly held assumption at the time, but one can wonder
why such an assumption is maintained so long, if unnecesary, and if it
depends critically on a methodological individualism that has its own
worrisome features. And, as Jon Elster, someone I don't commonly agree
with, has emphasized, the ERP condition assumes a methodological
indidivualism and can only be assumed on that basis.

That brings me to Andrew's and Paul's concerns. Paul argued essentially
that profit maximizing behavior could be the evolutionary stable strategy
and in a similar vein Andrew argued that you wouldn't necessarily need a
prime mover.

Here is the quote from Paul C:

"I doubt that this is necessary. One could assume initially a random
distribution of behaviours and show that the profit maximising behaviour
was what Maynard Smith calls the evolutionary stable strategy, in that
in a mixed population the profit maximising sub-population would displace
the others."

Well, I think he is right in a methodological individualist framework. As
I, and others, use MI, this implies a reduction of social causality to some
pre-given social atoms that are homogeneous to their type. Notably, in and
of itself, MI does not entail rationality, although both MI and rationality
are often used together. Now, if we assume all firms operate with the same
norm, e.g., maximization, and maximize over the same definition of profit,
and over the same time frame, then eliminationist models leading to an
evolutionary stable strategy of profit maximizing firms might occur. But,
as soon as one admits firms with different norms of behavior, different
goals, different measures of profit, and different time horizons, then, in
evolutionary terms, we have a problem with the unit of selection. A
variety of maximizing and non-maximizing firms can survive in the economy
(population). And, what people as different as Sidney Winter and Cutler,
Hindess, Hirst and Hussain have argued is that you don't get the
eliminationist outcome in such a world populated by heterogeneous firms. I
agree with this and I am arguing that a move away from homogeneous firms,
qua social atoms, that underlie the ERP condition as argued above, is pari
passu a move away from MI. I hope I am making clear that I consider a MI's
argument to be more than simply one which focuses on individuals, whether a
person or a firm, but rather MI is specific form of reductionist social
explanation, reducing complexity to homogeneity (and again, rationality is
a separate issue).

On a different note, Bruce is not persuaded by the Okishio theorem
"...because it depends on an assertion about capitalist choice behavior in
a very specific and thoroughly unreal situation-- comparing profits *at* a
uniform rate of profit calculated using the supposedly *reigning* prices of
production to profits as they would be with a new technique but the same
supposedly reigning production prices.......

I may be misunderstanding Bruce, but the attractiveness of the Okishio
choice criterion is its myopic nature. Firms choose a technique iff it is
cost-reducing at current prices of production, and then as _new_, not the
same, prices of production emerge, the new uniform rate of profit will not
have decreased.

Finally, I agree with this sentiment.

>I think that Duncan's intuition is absolutely correct--to influence those
>who've been persuaded by Okishio will require "something with as much
>equilibrium and stationarity assumed as possible."

Put another way, as I have argued elsewhere, the Okishio debate has, and is
in large part taking place on a different methodological terrain than the
"traditional" debate over the rate falling rate of profit, which involved a
dynamic like the one Andrew describes where capitalists are assumed to
respond to an innate drive to accumulate. A shift from a Hegelian to a
Cartesian form of social totality in my terms.

Steve C.

Stephen Cullenberg office: (909) 787-5037, ext. 1573
Department of Economics fax: (909) 787-5685
University of California Stephen.Cullenberg@ucr.edu
Riverside, CA 92521