A reply to Ajit's ope-l 5086.
Ajit wrote: "By the way, you have not responded to my reply to your
ope-l:4671. That reply proves the absurdity of your procedure of determining
prices from prices. ... Had you tried to come to grips with that critique, you
would not have come up with this hollow challange."
I HAVE INDEED responded to your reply (ope-l 4677) to my ope-l 4671, *part* of
which you have re-sent in ope-l 5087:
(a) In your reply (ope-l 4677), you questioned my claim to have demonstrated
that "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 presented
the demonstration in a subsequent post and we have been discussing it.
(b) In your reply (ope-l 4677), you concur with Dumenil, Levy (and me) 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."
My challenge to you in ope-l 5085 tests whether this proposition, which you
regard as a "tautology," holds true in your price theory, or alternatively,
whether that theory is absurd and self-contradictory.
(c) The *part* of your reply (ope-l 4677) that you re-sent reiterates your
allegation that what you call my price theory (BTW, I have no price theory,
nor a value theory; I have an interpretation of Marx's own value theory) is
"absurd." My challenge to you responds to this allegation by testing whether
it can be the case that current prices are independent of past prices, the
negation of which you have alleged to be "absurd."
(d) The *part* of your reply (ope-l 4677) that you re-sent also reiterates
the allegation that if the non-price determinants of prices are the same in
two periods, the prices of those periods must be the same. My challenge to
you responds to this allegation by testing whether this claim is compatible
with the "tautological[ly]" true proposition that the output prices of one
period equal the input prices of the next.
You claim to have "prove[n]" a proposition in your ope-l 4677. My challenge
tests the validity of this "proof" indirectly, by testing the truth-value of
the proposition. If a proposition is false, then it cannot have been proven.
I do not think that words such as "hollow" help matters. I think you protest
too much. Put some numbers where your mouth is.
Ajit: "The production conditions in period 1 and period zero gives price
ratio equal to 1:1 and the profit rate equal to 33.33%. What is your problem
with this?"
Since you have no problem with it, I have no problem with it in this context
either, since what is at issue is the internal coherence of YOUR OWN price
theory. Whether a particular proposition within that theory is true or false
is not germane to the issue of the theory's internal coherence.
Ajit: "Why price ratio from period -1 to zero has changed? It is because you
changed the technology. You reneged on your own assumption. Everybody knows
that a change in technology will lead to change in prices."
No *explanation* of the change -- or perhaps non-change -- in the price ratio
is required to meet the challenge.
I reneged on no assumption. Whether prices change when technology changes is
not at issue. What is at issue is whether you are able to sustain your claim
that when all non-price determinants of price are DO NOT change, prices
likewise DO NOT change. There is NO CHANGE between periods 0 and 1 in any
non-price determinant of prices. The challenge is for you to come up with
ANY set of prices that meets the conditions I laid down -- including the
condition that the prices DO NOT change between periods 0 and 1.
Ajit: "What you don't seem to understand is that when you are determining the
rate of profit, you must determine it on the value of the capital at the time
of the determination of profit. The rate of profit of period zero can only be
determined after the production is over, and at this juncture the prevailing
price ratio of the two commodities is equal to 1:1."
What you don't seem to understand is that how the rate of profit is determined
is not at issue. You are completely free to determine it on the basis of
output prices, as long as conditions (1) through (5) are satisfied. Again,
what is being tested is the internal coherence of YOUR OWN theory.
Actually, I'm happy to make the challenge even easier. My condition (2)
reads:
"(2) The rate of profit is equalized in both periods."
I'm happy to replace it with condition (2'):
"(2') Either the rate of profit is equalized in both periods, or the system
displays a *tendency* to equalize the profit rate, such that the absolute
value of the difference between the two departments' rates of profit is
smaller in period 1 than in period 0.
If you are proposing the price ratio of 1:1 as the output price ratio of
periods 0 and 1, then I'm sorry to say that you have not yet fulfilled the
challenge. (Of course, you haven't yet fulfilled it even if you are not
proposing this as the price ratio.) No matter how one calculates the rate of
profit, this price ratio is incompatible with conditions (3), (4), and (5),
taken together. I'll be happy to demonstrate that, if you wish. Also, it is
unclear what input prices you propose for periods 0 and 1.
Ajit: "Your argument seems to run this way: ...."
I made no "argument." My challenge tests the internal coherence of YOUR OWN
price theory. That is, it tests whether, if the output prices of one period
are the input prices of the next, as you hold, and the rate of profit is
equalized (or displays a tendency towards equalization), it is always the case
that, when non-price determinants of prices are the same in two periods -- AS
IS THE CASE IN PERIODS 0 AND 1 -- the prices of those periods will be the
same, as you hold. No "argument" will settle this question, and it is futile
to argue with me when I'm not arguing anything Only a set of prices that
satisfies my conditions (1) through (5), or your inability to provide one,
will settle this question.
These are the conditions of the problem. Hic Rhodus! Hic Salta!
Andrew Kliman