[OPE-L:4677] Re: [ANDREW K] Surplus value and capitalist

Ajit Sinh (ecas@cc.newcastle.edu.au)
Tue, 8 Apr 1997 23:53:13 -0700 (PDT)

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At 09:02 AM 4/8/97 -0700, Andrew Kliman wrote:
>A response to Ajit's ope-l 4639.
>Ajit: "Okay, I'm going to try it again."
>With, I note, a whole new set of questions. I answered his
>next-to-last set of questions in my ope-l 4635 (posted by Jerry),
>at the end of which I wrote: "Can you identify any internal
>inconsistency in this reasoning, Ajit? If so, please tell us what
> it is. If not, please state that you cannot."

Okay, I'll tell you what I think. Your logic leads to absurdities. In your
system of prices, the current prices are determined by a vector of non-price
determinants and last year's prices and last yesr's prices are determined by
last to last year's prices, and we go down the history till the first human
arrived on this earth. This implies that todays prices are determined or
affected by the prices that prevailed at the dawn of history. And this is an
absurdity. One could say, well there were no prices at the dawn of history.
Well, then when did prices come into being? An impossible question to
answer. To get rid of this absurdity, you introduce a totally arbitrary
element into your system: "Note that, by assumption, we begin with
stationary prices-- P[1995] = P[1994]." On what basis you defend this
"assumption"? Now, let me go straight to your equations to make the point
which your own equations make it for me:

>P[1996] = g(X, P[1995])
>P[1997] = h(X, P[1996])
>Quite obviously, g and h are different functions.
>Now, let us imagine that 1995 prices were determined as follows:
>P[1995] = f(X', P[1994]) = P[1994],
>where X' is a vector of non-price determinants that differs from X.
>Note that, by assumption, we begin with stationary prices --
>P[1995] = P[1994]. I think Ajit would agree that if X and X' differ,
>P[1995] will not equal P[1996] in general.

Sure, I agree that if X and X' are different then P[1995] will not equal
P[1996]. However, if they were the same, which is what I have been asking
you to assume, they would be the same. Thus, given your assumption, i.e.
P[1994] = P[1995], P[1996] is already known as long as we assume that X's
are held constant. And this has been my point all along. So it turns out
that you do not have a theory of prices, unless you make the absurd claim
that prices at the dawn of history are affecting prices today.
I think that Gerard Dumenil and
>Dominique Levy are reasonable persons. In their recent paper, "The
>Conservation of Value: A Rejoinder to Alan Freeman" (March 27, 1997),
>they acknowledge, on p. 15, that "A commodity cannot have a price as
>the output of one production period, and another as the input of the
>next period, since there is only one transaction."

Who would disagree with this statement, which is a tautology. This gives no
support to your arguments. And name dropings have never scared me.
>On to some of the new questions that Ajit raises in ope-l 4639.
>Ajit: "Wouldn't you agree that in a capitalist economy we find that
>prices of most of the commodities remain more or less stable for
>reasonable amount of time?"
>No. Between 1967 and 1993 in the U.S., there was only one year in
>which the CPI-U rose less than 3%. The prices changes, are, moreover,
>extremely broad-based. Nor are relative prices stable. Let's examine
>a very-low inflation year, 1993, during which the CPI-U rose 3.0%.
>In that year, the disaggregated percentage changes in prices, for
>major commodity groups, were
>energy 1.2%
>food 2.2
>shelter 3.0
>apparel & upkeep 1.4
>transportation 3.1
>medical care 5.9
>fuel oil - 0.9
>electricity 2.0
>utility (piped) gas 6.2
>telephone services 0.7
>The range of percentage changes is 7.1 percentage points. For these
>unweighted figures, the mean is 2.48; std. deviation, 2.21; and
>coefficient of variation, 89%.

Relative market price fluctuation of this range is quite compatible with the
theory of prices of production. My point was that on day to day basis,
prices do not, under normal conditions, fluctuate violently.
>Ajit: "When prices begin to fluctuate drastically, it amounts to
>some kind of crisis. In normal situation people, i.e. producers and
>consumers, capitalists and workers, go about their daily business
>with a sense of stability in the prices. This particular empirical
>fact ..."
>What empirical evidence do you have that this is the "sense"
>people have? The people I know think prices always change, so
>they hold off buying things in expectation of discounts. In the
>U.S., such behavior is more and more common, since the practice
>of varying the prices has become more and more common. The
>airlines are continually playing with airfares, and clothing
>and department stores are continually varying prices.

If "discount" has become the rule, let's say in some markets, then people
have a sense of it and they go about their daily business on that basis.
>Ajit: "This particular empirical fact has led most of the economic
>theorists to ask the question: what is it that determins these prices,
>because they don't seem to be arbitrary."
>Which prices are "these prices"? Actual prices, which are not
>stationary? The prices that people "sense," which you haven't
>shown are stationary either? Or imaginary prices corresponding
>to an imaginary stationary state?

Something which appears to be stable, does not have to be stationary. How
many times have you found in the US that two apples buy a new car? Doesn't
happen. Does it? why?

>For instance, Sraffa fails to prove that, in an economy with a
>surplus, there is only one set of exchange ratios that permits
>simple reproduction to take place together with equalized rates
>of return on capital advanced. Nor does he prove that there is
>a unique uniform profit rate in such a case. I demonstrated this
>in my paper "The Okishio Theorem: An Obituary," which I know
>that Ajit knows, because he was a presenter on the same panel at
>the ASSA in January at which I presented it.

I haven't read your paper. But your claim sounds outlandish.

Cheers, ajit sinha