[OPE-L:5120] [JOHN] Re: Questions to Ajit

Gerald Levy (glevy@pratt.edu)
Mon, 26 May 1997 12:33:28 -0700 (PDT)

[ show plain text ]

RE: OPE-L 5117


Thanks for your post. Your "deck clearing" efforts are appreciated.
Here, let me deal with some of the points you make and later get
back to you on questions concerning joint production.

Ajit wrote:

"I'll try to answer all your questions to the best of my abilities. But
before I get to that, let's clear the deck a bit. You and Andrew and the
general TSS approach, as well as others such as Fred Mosely, Glick and
Ehrbar and many others, have been calculating prices over periods of time
when prices are changing due to technical change etc. in terms of fiat
money; and you hold the value of one unit of fiat money constant over the
period of time. This is completely an indefensible assumption. What
argument one could provide in its defense?"

John responds:

Your question is a good one. I could simply say that Marx in CAPITAL
often makes statements like -- let so much money represent so much labor
as he considers technical change in sectors other than the one that
produces the money commodity. But that is not a defense. Thus, let's
proceed in a different fashion.

I do not think it's an accident that the money commodity is produced
with no raw material inputs and that entry into the branch of production
that produces it is limited as one has to have, for example, a gold
mine to produce gold. Correct me if I am wrong, but as I recall with
Sraffa as with Ricardo we find no possibility of absolute rent. Thus,
if I assume that labor is the only input in the gold sector, technical
change in the other sectors will not change the amount of labor it
takes to produce gold. Since the gold producers can earn absolute rent,
the value of gold does not change with changes in the techniques of other
sectors. That is, entry into and exit from the gold producing sector
need not occur at all. The labor it takes to produce gold remains
invariant, under these assumptions. Again, the assumptions would be
made only for sake of examining matters like technical change. Hence,
when someone says "let $1 represent 1 hour of labor", I do not consider
the statement problematic as they discuss technical change in sectors
other than the gold producing sector.

While the assumptions in the above are quite unrealistic, the idea
absolute rent can be earned by the producers of the money commodity
opens up the possibility that its value is invariant with technical
change in other sectors. Thus, when you write

"Ong (1983, HOPE 15, 207-27) has quite convincingly argued that such
a measure is an impossibility, because a measure of a change in the
condition of production itself is dependent on the prevailing rate of
profit .."

I find myself in disagreement as I assume that Ong does not consider
Marx's treatment of absolute rent. Note as well that for Marx all
sectors that are "natural monopolies" do not enter into his discussion
of the transformation of values into prices of production.

Ajit continues:

"A theory of prices is necessarily a static problem. Prices only tell us how
the different sectors of the economy are interrelated with each other.
That's why it is a ratio--an exchange ratio. We need a theory of prices to
understand the structure of an economy at any given time. Without it we do
not have an understanding of the structural relations of the economy.

John comments:

I think that the key phrase here is "at any given time." Had Newton
looked at that apple only "at any given time", he would have concluded
that apples never fall since at all points in time they remain
stationary. To be sure, there is nothing wrong with looking at apples
at a point in time as long as one recognizes that it is a static
picture. Put another way, once we know the hows and whys of falling
apples, we can abstract from the motion involved and examine the
hypothetical static situation.


That's it for now. I'll get back to you on your suggestion that I
consider Sraffa's treatment of fixed capital and joint production.

Cheers to you,