At 09:13 AM 5/14/97 -0700, Andrew Kliman wrote:
>A response to Ajit's ope-l 5001.
>Imagine, for instance, a two-producer sector, in which A buys 2500 yards of
>cloth at a price of $2 each, and B buys 200 yards of cloth at a price of $2.27
>each. Ignore other inputs and, in order simply to focus on price differences,
>imagine that they have the same technology: A extracts, say, 500 labor-hours
>and produces 50 widgets, and B extracts 40 labor-hours and produces 4 widgets.
> Also imagine that $1 = 1 labor-hour.
__________________
Then we could also "imagine" that elephants could fly! But, let me make a
more serious point. As I have already pointed out that if your $ is a
commodity such as gold or silver, then your "imagination" is completely
arbitrary. However, I have an impression that you and others think that if $
is a fiat money, then the "imagination" would be alright. Actually, however,
in this case the problem is even more serious. Let's suppose $1 buys 1x and
could also buy 2y. So in your case, the value of 1x = 1 labor-hour, as well
as the value of 2y = 1 labor-hour. Since $1 could buy either 1x or 2y, the
exchange ratio between x and y must be 1:2. However, this is also equal to
their value ratio. Thus, "imagining" or assuming $1 = 1 labour-hour amounts
to ASSUMING that Ricardo's labor theory of value holds!! Once you have
ASSUMED that LTV holds, then the whole point of transforming values to
prices of production is total absurdity. I hope Fred is also listening,
because this criticism applies to Fred with full force as well. Fred's
"development" of the 'new solution', which in my opinion is a weak solution
in itself, is no development but turns it into an absurdity. Cheers, ajit sinha