[OPE-L:5559] Re: Luxury Goods and Profit Rate

Ajit Sinha (ecas@cc.newcastle.edu.au)
Wed, 1 Oct 1997 23:25:39 -0700 (PDT)

[ show plain text ]

At 11:53 26/09/97 -0700, Andrew Kliman wrote:
>(1) In ope-l 5532, Ajit writes:
>"So the change in the technology in the non-basic sector only have its
>on its own price and not the long-term rate of profit.
>"No matter what you take as your measure of price, ... it will not change
>rate of profit in the corn sector as long as the ratio of net output (taking
>wages as advanced capital)and wages plus seed corn remains the same, because
>it is a pure number and independent of any measure of prices. It can change
>only when technology or the wage rate changes."
>Given that Ajit continues to make such statements without rising to my
>challenge which puts them to the test, I reiterate my request that he do the
>"simple class exercise" in Sraffian theory that I posted in ope-l 5484, and
>which I now append. In particular, note not only that part (a) addresses
>Ajit's claim that the profit rate is independent of nonbasic sectors, but
>part (b) addresses Ajit's claim that the measure of price will not affect
>profit rate in the corn sector.
>Initially, 5 units of corn are used (as seed and wages) to produce 6 units
>corn. One unit of corn and 24 chickens are used to produce 30 chickens.
>simultaneist profit rate is 20%.
>Now, imagine that the 6 units of corn can be produced using only 4 units of
>(seed & wage) corn.
>(a) Is the magnitude of the profit rate 50% -- "simply the ratio of net
>output of corn divided by seed corn plus wage corn"?
>If not, what justifies your claim that the profit rate is determined by
>"physical quantities" alone? If that is not possible in this case, then
>it true that you lack a general theory? And if that is not possible in this
>case, then why should I accept the claim that "physical quantities"
suffice to
>determine the profit rate in other cases? Why shouldn't I conclude instead
>that there's something seriously wrong with your theory, because you've
>*ignored* other determinants of profitability?


The reason I have not responded to your yet another "challange" is simply
because I'm trying to ignore you. Arguing with you is no pleasure. From my
last experience, I can say that instead of arguing, you indulge in
badgering. You always insult me by putting up "class exercises", "extra
credit points", and things of that nature, as if I was your student or
something; I do pity your real students. Of course, insulting ajit sinha is
quite exceptable for ope-l. It's only when ajit sinha matches insults with
insults that all hell breaks loose. It is a tough neighborhood for people
like me, and I have devised various ways of serviving. One of it is to
ignore cat calls and other kinds of comments by certain people. However, I
think my silence might just give a wrong impression to you in this case,
that your mighty "challenge" has silenced ajit sinha. So I have decided to
decend to your "challenge" to yet again expose the sillyness of it all.

In your chicken sector, it takes 24 chicken to produce 30 chicken. Thus
even if corn was free, the maximum rate of profit this sector could provide
is 25%. Now, when there is 50% rate of profit in the corn sector, then
obviously all the new investment will flow in the corn sector and in the
long term the chicken sector will cease to exist. It is simply not
productive enough in the current economic inviorenment. What is the big
deal about it? Think about it. ajit sinha
>(b) If the profit rate is not 50%, what *is* its magnitude?
> (i) assume that corn is the numeraire
> (ii) assume that chickens are the numeraire
>Note: I'm interested in the economy-wide (general) profit rate, not (only)
>the sectoral rates.
>(c) BONUS TEXTUAL QUESTION!!: According to Sraffa, how is it possible for
>both the corn producers and the chicken producers to obtain a 50% rate of
>(d) EXTRA CREDIT!!: Was Sraffa a "Sraffian"?
>(2) Ajit tries to reiterate his view that the commodities in the Sraffa
>equations are aggregates of heterogeneous use-values: "You think the idea
>differentiated product would kill his life long work and he wouldn't even
>This poses an interesting question, but it does not provide an answer to the
>aggregation issue. However, I have already provided the answer in ope-l
>-- Sraffa's commodities are not aggregates. Since Ajit has neither
>to it nor taken it into consideration in this latest repetition of the claim
>that Sraffa's commodities are aggregates, I now append my answer:
>"Paolo Giussani has noted that "[s]ince the slightest change in usevalue is
>enough to make a product a novel product, looking at what happens every
day I
>feel comfortable to state that a very large part of products that come out
>each different 'production cycle' (Sinha uses this quite mysterious
>expression) are novel products, and thus nonbasic products."
>"In response [OPE-L:5483] , Ajit Sinha opined that "[s]ince Sraffa's
>are equations for industries or sectors rather than firms, they obviously
>contain differentiated goods. No slight change will make every product
>'non-basics', that's simply silly."
>"In other words, according to Ajit, Sraffa's system aggregates physically
>distinct things.
>"This, however, was definitely NOT how Sraffa understood his own equations.
>a letter of 4th June, 1962, to Peter Newman, Sraffa wrote:
>"'You find a further ground for attacking the distinction between basics and
>non-basics in the supposition of its being 'partly a matter of the degree of
>aggregation in the system' (p. 67 [of Newman's article]). Now aggregation
>the act of the observer, whilst the distinction is based on a difference in
>OBJECTIVE PROPERTIES. I have argued, for instance, that a tax on the
price of
>basics will lower the general rate of profits for a given wage, whereas a
>similar tax on non-basics will leave the rate of profits unchanged. Surely,
>to answer this, one must prove the alleged consequence does not follow,
>AGGREGATION [caps added].'
>"Therefore the "commodities" of Sraffa's system are, according to the author
>(1) NOT differentiated;
>(2) classified according to their physical differences -- the "objective
>properties" that distinguish one from another.
>"Now, even "the slightest change in usevalue is enough to make a product"
>*objectively* different from another. Indeed, when the change in usevalue
>"slight" or not "is the act of the observer," a *subjective* one.
>any change in use-value whatsoever means that we have a different
>in Sraffa's sense, a "novel product." And therefore Paolo is 100orrect:
>"a very large part of products that come out of each different 'production
>cycle' ... are novel products, and thus nonbasic products."
>"In ope-l 5479, Ajit wrote: "I cared to know a bit of Sraffian literature,
>had you shown the same care
>before coming out with your gun blazing against Sraffa and the Sraffians you
>would have known it too." Unfortunately, a bit of knowledge is a dangerous
>thing. Sadly, Ajit seems not to have cared to know a bit more."
>(3) Finally, Ajit writes:
>"Let's suppose after every production cycle steel comes out little whiter
>the previous one from the steel mill. Now, as long as the steel mill needs
>use the same amount of this whiter steel per unit of output of still whiter
>steel, as well as all other sectors that use steel in their production
>need to use the same amount of steel, how is this slight variation in the
>quality of steel going to make any difference to Sraffian equations?"
>The answer to this should be obvious to one who purports to be an expert on
>Sraffa. Since commodities are distinguished by Sraffa according to their
>"OBJECTIVE PROPERTIES," (a) the new steel in each "cycle" is a non-basic;
>the steel input in each "cycle" is not reproduced, i.e., does not appear on
>the output side of the equations; therefore (c) there is an extra unknown
>no extra equations; and therefore (d) the system cannot be solved. The
>breaks down.
>In you can run but you sure can't hide solidarity,
>Andrew Kliman