[OPE-L:4402] Re: KM's interpretation of the TP

Ajit Sinh (ecas@cc.newcastle.edu.au)
Sun, 16 Mar 1997 23:50:53 -0800 (PST)

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I mostly agree with Fred and Allin on their criticisms of Andrew Kliman and
Ted McGlone and others who are following a similar approach to the
transformation problem. Their approach has never made any sense to me. The
problem is simple: KM claim that the input prices are equivalent to value
and the divergence between value and prices occur only in the outputs. This
is the fundamental proposition crucial to their whole approach--leaving
aside the question of assuming the value of money equal to one. My question
is this:

Let us suppose the system is in simple reproduction schema, just for
simlicity sake, and that nothing in the world changes from period zero to
period one. In this case every reasonable person would think that the prices
in period one would remain the same as the prices in period zero. Now as KM
claim that the prices in period zero is given, "we know it", then it is
quite clear that in our hypothetical case we also know the prices in period
one. No need for a theory of prices! This reveals the bankruptcy of KM
approach. You cannot have a theory of prices when prices are determined by
prices themselves, no matter whether you call one price "value" or whatever.
To have a theory of prices, you must determine prices from some data other
than prices. Otherwise, your theory turns into 'check it out theory', ie. go
out in the market and check it out what prices are prevailing--let's leave
the question of which prices should we check out, since there are always too
many different prices for the same commodities in this world. Cheers, ajit