[OPE-L:6498] [OPE-l] Small expectations

Alan Freeman (a.freeman@greenwich.ac.uk)
Fri, 24 Apr 1998 03:46:35 +0200

This is a response to a number of posts dealing with the total price of
goods, eg John Ernst on 10 April, Jerry on the same date, and Jerry on 16

My initial point was:

(1) At any given time, we may legitimately add up the total price of
everything that is available for sale.

(2) At any given time, we may legitimately add up the total value of
everything that is available for sale.

I call the result of (1) 'total price'
I call the result of (2) 'total value'.

I have heard a lot of interesting discussion about these two
propositions, but I don't think I've heard a refutation.

Jerry writes:

"The price listed for many commodities may be purposely inflated since the
seller expects to decrease the price in the sales process. In other words,
the so-called "list price" may be, and often is, a fictitious price that
the seller has no intention of selling the commodity for. Yet, if at a
single moment in time we added-up all of the prices for commodities in the
manner you suggested in your post on Wednesday, we would also have this
fictitious component that would inflate the aggregate price level."

Alan responds:

The 'price of cauliflowers' as I defined it is not just a list price. It is
a price at which at least one person actually bought a cauliflower. This is
not altered by the fact that not all the cauliflowers are sold. At 10.00am
in Safeways, Blackheath, England, a cauliflower changed hands for $1 at
current exchange rates. I call that 'the price' of a cauliflower. It is not
expected, intentional, future, or inflated; it is actual; it is the money
that someone, somewhere, actually pays, for at least one instance of the
genus cauliflower. This then becomes the price of the genus cauliflower,
which is what I think economists mean when the speak of 'the price' of
a cauliflower.

Now, I don't think that's fictitious; it's the subject of an actual

Second: why go to all this trouble to distinguish the actual price from
some other price? Does the cauliflower have a price at 10.00am in the
morning, or doesn't it? Even if no actual cauliflower changes hands at that
exact moment, if one wants to distinguish the 'fictitious list price' from
the 'actual price' then by implication, this actual price exists, in order
that the fictitious price may differ from it.

Or, is the point that the cauliflower doesn't have a price at all at 10.00
am? If so the words 'fictitious price' are surely inapt: in order for a
price to be fictitious, there must be an actual, non-fictitious price from
which this fictitious price differs. If, on the other hand, there is an
actual price but it happens to be different from the list price, then my
point is not refuted. Jerry is only saying that I have not measured the
price very well, that I have mistakenly taken the vendors at their word.

But, nevertheless (if this is what he is saying), this actual price exists.
So he could agree to my point, if he was so minded, and we could take his
supplementary points as refinement, rather than contradiction.

In that case my initial assertion remains valid: at every point in time,
every good has a price; we may add up these prices, and arrive at a total
price, this being the price of all goods in society.

I think there are two sources of confusion. First, a distinction exists
between the price of cauliflowers in general, and the price of a particular

Of course, a particular cauliflower might have a price of $1 stuck on it at
10 in the morning, but that this ticket might be removed as time goes by
and replaced by tickets reading, successively, $0.80, $0.60, etc.

In this sense, the cauliflower is 'offered' for $1 and sold for say $0.40.

But the cauliflower is only the representative of its type. While it sits
on the shelf, its sisters and brothers are indeed being sold for all of the
various 'list prices' that are placed on its head. One cauliflower's list
price is another's sale price. Since these are the same, I take the direct
road of referring to the two identical numbers as 'the price' at 10:00am.

When we speak of 'the price' of cauliflowers, we speak of the price of an
undifferentiated cauliflower; we don't distinguish one from the other.
That, to me, is what 'the price' of a cauliflower means.

Second, I think there is a deeper but unspoken confusion that arises from
the attempt to apply discrete, period models to a reality that is actually
not governed by any particular periodicity.

I think that Jerry, as many people do, is attempting to conceive things
thus: at a certain point in time, the cauliflower is being produced or
offered for sale; this is one point in its cycle or period. At another
point in time, it actually gets sold; this is another point in its cycle.
What Jerry seems to be suggesting is that we can distinguish the point at
which the cauliflower is 'offered for sale' from the point at which it is
'sold'. But we could only do that if all manufacturers and resellers of
cauliflowers marched in convenient step to the pre-ordained periods which
the economists laid down for them.

But they don't do that. On the streets and in the shops, we find
cauliflowers at all stages of production and sale. You cannot arrest all
the cauliflowers in the world and determine their price to be 'fictitious'
just because they are not all sold at once. Unfortunately, in this messy
old world, some are being listed while some are being sold and yet others
are being eaten. What actually happens is this: the 'fictitious list price'
of each cauliflower is set with an extremely careful eye on the neigbouring
cauliflower that is far from fictitiously passing through the checkout at
the very moment the list price is set. So careful, that we can rarely tell
the difference.

It would be very nice if the customers in Safeways stopped buying
cauliflowers at 10.00am because this didn't happen to come at the end of
one of our neatly defined 'periods'. Or say, when we took the cauliflower
to the checkout, the assistent refused to take our money and told us to
come back at 4:00pm to find out the actual price.

If that happened, if cauliflowers sold in some kind of Walrasian auction,
then we could make the distinctions that Jerry wants us to make; we could
say 'at 10:00am cauliflowers were offered for $1 but this was just an
offer. In point of fact they all sold at 4:00pm for a mere $0.40. therefore
the real price was $0.40 and the $1.00 was just a haggle.'

But that isn't what happens. Contrary to the desires of the economists,
people just go out into the streets and buy cauliflowers all the time,
blissfully unaware of the period in which they are supposed to be doing it.

When they do so, what they pay is 'the price' at that time.