# [OPE-L:5146] Censoring Ajit?

andrew kliman (Andrew_Kliman@msn.com)
Thu, 29 May 1997 09:18:39 -0700 (PDT)

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The subject line was intended to get your attention. And this post is indeed
about "censoring Ajit?" though perhaps not in the way you thought. I have
challenged him to demonstrate that his price theory isn't internally
consistent. He has not yet produced a set of numbers that would do so. He
keeps bringing up the fact that I did not reproduce part of a post he wrote,
as if this means that I am censoring him, and as if the numbers contained
therein do constitute an adequate response to the challenge.

They do not.

Here is the "censored" passage, from his ope-l 5086.

"Your argument seems to run this way: Let's suppose y is chosen as the money
commodity. And given the prices in period -1 equal to 1y = 2x ( and mind
you, you have arrived at these prices by assuming same input-output prices
and equalizing the rate of profit, otherwise you have absolutely no way of
arriving at the prices in period -1, and your whole exercise will become
void and absurd), you want to calculate the capital investment of period
zero on the basis of this exchange ratio. Thus the capital investment in
department one becomes 5 and in department 2 it becomes 7. Now what you want
to do is to put the equation for period zero as:

Department 1: 5 (1+r) = 12x
Department 2: 7 (1+r) = 12y

"Now, to determine the three variables from the two equations, you would
again want to put the value of y =1, which basically amounts to saying that
the technical change had no impact on the money commodity, which would be an
absurd claim. The absurdity of the whole thinking process becomes quite
clear when we alternately chose y as money-commodity, and then x as money
commodity. When we put y = 1, the rate of profit r becomes equal to 5/7, and
when we put x = 1, the rate of profit r becomes equal to 7/5. I hope by now
you must have started to see the light."

I made no argument, so the whole passage is irrelevant to the challenge, as I
have noted before. That is a sufficient answer, but Ajit wants more, so I'll
give him more.

What is at issue is the internal coherence of Ajit's OWN price theory, so I
began with the prices that HE accepts. Whether these are the prices that *I*
would "arrive at" are irrelevant. The stuff about me wanting to calculate the
investment on this or that basis is a red herring. I am not calculating
anything. Ajit is the one being challenged to show that HIS price theory is
not internally incoherent. Moreover, even he is not *required* by the
challenge to calculate the investment of period 0, though he may do so if he
wishes.

Ajit then goes on to protest, rightly, against the notion that one can
arbitrarily adopt a numeraire (hold constant the price of my good 2, which he
calls "y"), but he somehow manages to attribute that notion to me! The TSS
interpretation is *rooted* in a denial that Marx held this notion!

Thus, what Ajit takes to be the TSS equations are not. Given a uniform profit
rate and the exchange ratio 2 good 1 = 1 good 2 at the end of period -1/start
of period 0, the TSS equations are

5*P2[-1,0]*(1+r) = 12*P1[0,1]*(1/[1 + 0m])

7*P2[-1,0]*(1+r) = 12*P2[0,1]*(1/[1 + 0m])

where 0m indicates the percentage change (in decimal form) in the monetary
expression of labor-time (MELT) between the start and the end of period 0. I
count 2 equations in 5 unknowns. The example does not provide enough
information to determine the input prices, the output prices, or the profit
rate. (But we can say that *if* the profit rate is equalized, P1[0,1] =
(5/7)*P2[0,1].) Again, no adherent of the TSS interpretation would hold that
the value of ANY commodity, including a money commodity, remains constant when
technology changes. Quite the contrary.

Since Ajit's charge of absurdity is based on an elemental misunderstanding of
the TSS interpretation of Marx's value theory, the charge is baseless.

However, Ajit also seems to suffer from another misconception, one that he
repeats in his ope-l 5144, namely that I have required him to hold the value
(or price) of one of the goods constant throughout time. It have not. Let me
quote the condition concerning the unit of measurement:

"(5) Although Ajit may choose whatever units he wants in which to measure
prices, the units of measurement must be consistent throughout the time
period, from the start of period -1 through the end of period 1."

This states only that the unit of measurement must be constant. It does NOT
require that prices be measured in terms of one of the 2 goods. They may be,
but they need not be. They can be measured in terms of some bundle of the two
goods, they can be measured in terms of the standard commodity, they can be
measured in terms of a non-commodity (such as labor-time, fiat money, etc.).
They can be measured in any way Ajit desires. The challenge concerns
*prices*, not *values* (in any sense of the word "value"), so it has nothing
to do with the *measure of value*. Ajit is reflecting the bourgeois confusion
between *measure of value* and *standard of price*. Clearly the standard of
price must be the same; that is a condition of the problem because one could
always make input prices equal output prices simply by using a different
standard of price for each of the two goods.

Given the *same* standard of price, NO MATTER WHAT IT IS, Ajit's proposed
price ratio 1:1 doesn't work. He seems too prideful to ask for the
demonstration of this which I offered to give. But because his apparent
belief that he has somehow met the challenge successfully stems from his
inability to understand the problem, especially to recognize the irrelevance
of the invariability or variability of the value of the thing that serves as
standard of price, I guess I'll just have to give the demonstration.

Here goes. WHATEVER the unit of measurement (standard of price) may be, at
the end of period -1, a unit of good 2 is worth twice as much, in terms of
that standard, as is a unit of good 1. The thing that serves as that standard
doesn't matter. Let us call it TSASP (thing serving as standard of price),
and let's say that the price of a unit of good 1 is z TSASP. Then the price
of a unit of good 2 is 2z TSASP.

Now, Ajit proposes the price ratio 1:1 for both the input prices and the
output prices of period 0. This implies that the price of a unit of good 1,
as input and as output of period 0, is z' TSASP, and that the price of a unit
of good 2, as input and as output of period 0, is also z' TSASP. But Ajit has
told us that it is a "tautology," a necessarily true proposition, that the
output price of one period equals the input price of the next, since there's
only one transaction. Hence, the period 0 input price of good 1, z' TSASP, is
the same as the period -1 output price of good 1, z TSASP. Hence z = z'. So
the period -1 output price of good 2, 2z TSASP, is also expressible as 2z'
TSASP. The tautology requires that this price be the same as the period 0
input price of good 2, z' TSASP. But 2z' TSASP is not the same as z' TSASP.

Ajit's "solution" therefore fails. It will fail no matter what the thing is
that serves as standard of price. The fact that the *values* of goods 1 and 2
change between periods -1 and 0 clearly does not mitigate that failure.

The above is my response to the "censored" passage. It also responds in full
to Ajit's latest post, ope-l 5144, except for one sentence which makes no
sense:

"When I said that when an output is bought as in input, it is one transction,
and by definition there is only one price here, and there is
nothing wrong with it."

If and when Ajit explains what he means, I'll be happy to respond to this as
well.

For now, it should be clear, the challenge stands, and Ajit has still not met
it successfully. The internal consistency of his price theory is still on
trial.

Andrew Kliman