[OPE-L:5094] Re: Abstract prices or absurd, self-contradictory

Ajit Sinha (ecas@cc.newcastle.edu.au)
Thu, 22 May 1997 03:04:14 -0700 (PDT)

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This is a reply to Andrew's ope-l:5088

Arguing with Andrew Kliman is probably the most frustrating thing a man
could indulge in in this world. He either does not understand economic
theories or pretends not to understand. He may not have studied economics as
a student, and might have just plunged into marxism straight away-- some of
his earlier postings suggest to me that this probably is the case. Then in
that case his high rhetoric against well accepted economic theory is out of
place. In the last post he suggested that if I prove 'my theory', given his
conditions, then he will accept that his theory is absurd and admit it
publicly and may be also in print. And this is the kind of logic I have to
work against all the time. It is not enough for me to prove to him nth time
that his theory is absurd, for him to accept it. Every time I show him that
his so-called interpretation of marx's theory of value and transformation
problem that rests on assumptions that prices determine prices and 1$ = 1
hour of labor are both absurd assumptions, he neately cuts them out and gets
into the game of cut and paste of quotations and rhetorics. He probably
thinks that nobody reads what I send to the list, so when he cuts my
arguments in his response nobody will know. Now, I have decided not to waste
more time playing this frustrating game. I long for a Samuelson who would
have honesty and enough guts to admit that he was wrong when it was pointed
out to him in the reswitching debate.

The problem with Andrew is that he nither understands value, nor prices, nor
money as a unit of account; and these are the three concepts he is dealing
with. His basic problem with the input-output theory of prices is that
inputs are bought before outputs are produced and so their prices should be
different. But he should know that at any given time point there could be
only one price for a commodity. So the valuation of capital, which is what
input prices are in input-output theory, must be made by the same prices as
the prevailing output prices at that point of time. Anybody, who has read
Marx closely should be clear about this. Marx categorically makes the point
that if a commodity lasts for more than one time period, for example cloth
or machine, and the technology in the meanwhile changes making the
production of the same cloth or machines easier, then the old cloth or
machine would fall in value, since the value of a type of commodity must be
the same at any given point of time. All the problems Andrew and John Ernst
are talking about stems from a general mishandling of the concept of money.
They generally have fiat money in mind, and when they talk about rise and
fall in prices, they hold the value of fiat money constant. But this is
clearly an unjustified assumption. The value of fiat money is nothing but
the amount of goods and services it can buy. When all the prices have risen
or fallen proportionately, it means that the value of fiat money has fallen
or risen by the same proportion. Not appreciating this point is at the root
of Andrew's claim that Sraffa's profit rate is not unique. When I pointed
out that the profit rate, in his example, must be calculated on the value of
'real' capital investment--meaning that the change in the value of fiat
money because of his assumption of price deflation must be corrected--he
simply showed a complete nonunderstanding of the issue and went on a long
rhetoric about "real". Similarly, when I told him that the price of corn at
any given time would be the same no matter if they were produced some years
apart as long as corn was corn, he went on to list price of corn for several
years in dollar terms to show me that price of corn varies over the years,
as if this must come to me as a great revelation! I must say I do feel quite
tired. It is too much to expect from me to keep on explaining the first year
undergraduate stuff like the difference in 'real' and 'nominal' and what
does numerier means etc. specially when the other side is only interested in
rhetorical games. Andrew says: "you protest too much". My answer is: you
understand too little. I sometime feel I'm breaking my head against a brick
wall. Cheers, ajit sinha