[OPE-L:5372] Re:Luxuries in the New Solution

Ajit Sinha (ecas@cc.newcastle.edu.au)
Sun, 17 Aug 1997 23:04:20 -0700 (PDT)

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At 20:58 14/08/97 -0700, you Rieu wrote:
>Yes, his example itself is correct.
>In fact, this is one of the two cases in the simultaneist system.
>1)wage=0 case 2)full automation case(i.e. l=0)
>To think in the Sraffian way will clarify point.
>>From the simultaneist system, p=(pA+wl)(1+r), the general rate of profit(r)
>is determined by only the structure of matrix A(i.e. max. eigen value).

In your formulation above, wage goods are treated as basics, and so it will
affect the rate of profit. Thus, it would be incorrect to say that only
matrix A would determine the rate of profit (r). w is a determinant of r as

In my opinion, the basic question one needs to ask on this issue is, why
should a change in production condition of a 'luxury good' (i.e. non-basic)
have any impact on the long term prices of capital and wage goods? Cheers,
ajit sinha