[OPE-L:2999] Re: Okishio and mathematical Economics

Bruce Robert (broberts@usm.maine.edu)
Tue, 10 Sep 1996 12:25:41 -0700 (PDT)

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Brief replies to John and Steve C.:

John wrote:

1. If one is going to use equilibrium points in an analysis
of technical change, need not the destruction of value
somehow play a role as one traverses from one
equilibrium point to another.


Part of my point was that the economy never "traverses from one equilibrium
point to another."
But I certainly agree that destruction of value (and depreciation and
appreciation, release and tie-up) is part of the process of traversing
between the out-of-equilibrium, non-equivalent-exchange positions
associated with different technologies (and therefore different ratios of
equivalent exchange).


2. To say that Marx assumed exchanges at PoP somewhere
in CAPITAL is simply wrong. Marx himself stated that
various sectors of the economy do not enter into the
formation of PoP. He noted that the sectors in which
there is a natural monopoly are not part of his presentation
of PoP in Chap. 9 of Vol III. (See Marx to Engels, 04/30/1868)
What is the basis for ignoring this?


I'm puzzled here. I didn't think I was "ignoring" this, at least no more
than Marx was in abstracting from these issues when initially presenting
the concept of PoP. Once we bring them into the discussion, rent, monopoly,
government controls and many other circumstances alter the simple
competitive definition of equivalence. But I do think it's clear that Marx
views exchange at PoP as supplanting exchange at value as the meaning of
equivalence in competitive capitalist circumstances (see, e.g., Capital 3,
Vintage, pp. 296-97).

Steve wrote:

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?"


Despite the fact that others may use the term differently, I don't think
the notion of a center of gravity requires convergence, or even a
"tendency" to convergence. As I understand the term in Marx, it simply
involves movement "around" the center of gravity, with no necessity for any
ultimate "movement to equalization." Equivalent exchange is the center of
gravity for the fluctuations that occur in response to non-equivalence.
Using the term in this sense, as opposed to a temporal sense ("long-run
equilibrium") is the intent of the term "structural abstraction."


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.


My instinct here is almost "What, me worry?" Sure, some uses of an ERP
condition do rest on MI premises, but I can't accept, or even really
understand, the grander claim that *all* uses of the concept are MI in some
serious and worrisome way. I guess I just don't understand your concept of
MI and why you want to use it in such an expansive fashion.


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.


I believe I do understand the claim Okishio makes, and I agree that its
"myopic nature" is probably part of what makes it attractive to those it
attracts. My point was simply that firms do not *know* current prices of
production (how could they, when all they have to observe and work with are
current and past *market* prices--not at all the same thing).

Bruce B. Roberts
Department of Economics
University of Southern Maine
Portland ME 04104-9300
(O) 207-780-5503
(H) 207-772-7047
fax 207-780-5507-------------------------------------------------