[OPE-L:5148] Used Cars

andrew kliman (Andrew_Kliman@msn.com)
Thu, 29 May 1997 14:45:49 -0700 (PDT)

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I have no desire to argue with Ajit. I have expressed that lack of desire
several times. Rather, I want Ajit to produce some numbers that acquits his
price theory from the charge of internal inconsistency, or to admit that this
cannot be done. This post does not constitute an entrance into an argument
with Ajit.

I am very reluctant, therefore, even to get into the matter of the used car.
The only reason I am doing so is because I have been persuaded that my failure
to respond might well lead listmembers into a gross misunderstanding of the
TSS interpretation.

In ope-l 5133, Ajit wrote:

"Time and time again I have said that price is a measure at one point of time,
but you want me to maintain that price of a commodity remains the same
eventhough it has changed over time. Why? because lay people think that way.
What kind of argument is that? Let me give you an example, When you buy a new
car and drive it out of the lot, you know that it immediately loses some
value. Let's say you bought a new car for $20,000. It is one day old and still
in mint condition. If I ask you what is the price of your car, you probably
would say $20,000. It would be okay in lay peoples world. However, for an
economists the price of your car is not $20,000 but something like $19500,
because that's the price you would get in the market. And this is a simple
point, which you don't seem to understand."

Neither I nor any proponent of the TSS interpretation thinks that, or thinks
that Marx thought that, the price of a commodity remains the same even though
it has changed over time. Quite the contrary.

What we maintain is that he held that the price (or value) of an article, at
the moment it is employed as an input, can differ from its price (value) at
the later moment when it emerges as output of the same production period (or,
more precisely, differ from the price (value) of articles of the same type
when they emerge as outputs) . The reason is precisely that production takes
time, and so the price (value) can change over time.

I certainly do not want Ajit to maintain that price of a commodity remains the
same even though it has changed over time. Unfortunately, this does happen to
be what his price theory implies. As I wrote in ope-l 5137, "Ajit is right
that 'Time and time again I have said that price is a measure at one point of
time.' But he has also said that the equality of the output prices of one
period with the input prices of the next is a 'tautology.' What is at issue
is whether Ajit's "necessarily ... static" price theory is self-contradictory,
because it violates this 'tautology.'" If one holds that input and output
prices are equal, and that the output price of one period is the same as the
input price of the next, then, if the price of a commodity changes over time,
it still remains constant. (More precisely, Ajit's theory can escape
self-contradiction only by holding that prices cannot change over time.)

I know of no "lay people" (what are we, clergy?) who think that the price of a
commodity remains the same even though it has changed over time. It is a
stupid, self-contradictory kind of argument.

The used-car example is totally irrelevant to the challenge I put to Ajit:

(1) In the problem I posed to Ajit, the inputs NO LONGER EXIST at the time of
output, whereas a used car obviously does;

(2) when we speak of input prices and output prices, we are speaking about the
prices of the same *type* of commodity, something of the same *use-value*. A
new car and a used car are not the same use-value, which is why a used car is
worth less than a new car. This seems not to be the case in Ajit's example,
because he says that the price drops immediately after the car leaves the lot
(which is true), even though it is supposedly "still in mint condition." But
it is NOT in the same condition to the *purchaser* of the car. Some
guarantees and warranties apply only to the original owner, and even when that
is not the case, one cannot be sure of the condition: maybe the owner turned
back the odometer. Maybe s/he discovered something wrong with the car after
having bought it. Since one does not *know* with certainty what the use-value
of the car will be, these possibilities reduce its *expected* use-value to the
purchaser, which lowers its price;

(3) the used car example has nothing to do with *inputs* into production and
*outputs* emerging from it;

(4) once the car is driven off the lot, time has elapsed. The TSS
interpretation certainly recognizes that prices change over time. The elapse
of time is indeed what permits input and output prices (values) to differ.

I hope the foregoing makes clear that Ajit's used car story causes no problems
for the TSS interpretation. I have spoken and saved my soul.

Andrew Kliman