[OPE-L:121] [OPE-L:357] Michael Re: BK's and the Asian Crisis (fwd)

John R. Ernst (ernst@PIPELINE.COM)
Wed, 25 Nov 1998 09:10:39

>To: <ernst@pipeline.com>
>Subject: Fw: [OPE-L:354] Re: BK's and the Asian Crisis (fwd)
>Date: Tue, 24 Nov 1998 19:12:55 -0800
>X-MSMail-Priority: Normal
>X-Mailer: Microsoft Outlook Express 4.72.3110.1
>X-MimeOLE: Produced By Microsoft MimeOLE V4.72.3110.3
>Hi John, Good to hear from you.
>John, I am out of town. Could you please forward my response to the list?
>John Ernst wrote:
>>Granted with the destruction of capital value, profit rates increase.
>>But what are we talking about? That is, how are we to understand that
>>"capital values evolve in time" and that "historical values soon
>>become irrelevant"?
>>Moreover, the values of the outputs of one
>>period of production are unrelated to the values of the inputs of
>>next. The question remains -- when and how can devaluation take
>>place if valuation is simultaneous?
>I purchase a capital good that has a value X today. Conditions change, even
>before I have installed it. Now it has value of 1/2 x. I see existing
>capital goods values determined in the market [not as prices]. Current
>inputs, say electricity, are valued at their current values which are
>affected by the elmination of capital values.
>How do these market-like changes occur? Most of the time, they do not. I
>see crises [whether sectoral crises as general crises] coming from time to
>time, and creating a "slaughtering of values."
>>Given falling prices of outputs, the idea that inputs and outputs
>>are to be simultaneously priced seems especially ludicrous.
>No problem. I do not believe in simultaneous pricing.
>>input and output prices merely adjust so that the unit prices of
>>inputs are equal to those of the outputs. Again, the how's and
>>why's of devaluation disappear.
>Your last statement seems reasonable. I don't have a problem with TSS. I
>think that most of my writings are consistent with what you suggest. I
>would only suggest that the adjustments come in fits and starts.
>As a result, the adjustment does not occur for long stretches of time and
>then comes with a rush during times of confusion.
>>Michael wrote:
>>The complexity comes from the difficulty of getting from here to there.
>>The paroxysism of a deflation unsettle all existing relationships and can
>>destabilize society.
>>John writes:
>>To get from here to there we have to travel in time. That is my basic
>>point. We have to have a theory that allows us to view capital's valuation
>>and devaluation in time.
>>Much of the rejection of the TSS approach stems from an unconscious
>>abstraction from deflation and from devaluation. To be sure, for
>>most of our lives in the West we have rarely experienced either.
>>Indeed, the usual manner of calculating the rate of profit is
>>carried out as though neither inflation nor deflation exist. With
>>inflation, this type of calculation seems necessary lest one
>>include inflationary profits within the overall calculation. With
>>deflation, this manner of proceeding seems surreal. That is,
>>given deflation the usual Marxist approach simply skips over the
>>monetary losses of capitalists. We might as well tell capitalists
>>that there is no problem with deflation and devaluation as their
>>rates of profit are increasing from period to period. Thus,
>>the folk that disagree with your statement that
>>"The paroxysism of a deflation unsettle all existing relationships
>>and can destabilize society."
>>are those wedded to an approach that abstracts from deflation while
>>making adjustments for inflation. More practical capitalists like
>>Rubin and Greenspan know better.
>>Michael Perelman
>>Economics Department
>>California State University
>>Chico, CA 95929
>>Tel. 530-898-5321
>>E-Mail michael@ecst.csuchico.edu