Re: (OPE-L) Ajit's paper

From: Ian Wright (iwright@GMAIL.COM)
Date: Mon Jun 07 2004 - 18:10:04 EDT

Hi Ajit

I'm happy to discuss, time permitting, the merits, or lack of them, of
economic theories that take prices in a previous period as a
parameter, as some particular TSS models do. But I was originally
concerned to refute:

> But these prices are determined by the determinants other
> than prices. That's why it qualifies to be a theory of prices. If
> they determined prices of a commodity in time t on the basis
> of observed prices of the same commodity in time t-1, then it
> would not be a theory of prices but rather be simple
> mumbo-jumbo, which is what TSS is.

because this amounts to a rejection of the coherence of temporal
theories of price, a stronger and more basic criticism, and one that,
in my opinion, represents a barrier to a full understanding of the
function of price and the meaning of value.

I have tried to explain that your epistemological claim of what
necessarily constitutes a theory of price is in fact an unacknowledged
ontological claim -- because it denies, without justification, the
empirical possibility that prices affect prices. If it is the case
that prices affect prices then a static price theory that makes no
reference to previous prices misses a determining factor. Hence, it is
an incomplete theory of prices. It is possible to deny that price
affects price in reality, but it is not possible to deny this as a
methodological principle. Whether a price theory can be considered
complete or not is ultimately an empirical question. It certainly
cannot be decided on only logical or analytic grounds. For example, I
think a complete theory of price will have precisely that feature you
label "mumbo-jumbo".

More generally, I think this points to deeper philosophical
differences, which I find very interesting. For example, the reduction
of ontology to epistemology is a characteristic feature of
philosophical positivism, as identified by Bhaskar. I think your
methodological requirement for a price theory is an example of such a
reduction. Another feature of positivism is the tendency to reduce
mechanisms to events, which can manifest as a denial that events can
be either over- or under-determined. For example, in the literature on
the transformation problem, it is assumed, again without
justification, that if the law of value and the law of equal profits
are contradictory then one of those principles must be rejected
(usually the law of value). It is incorrectly deduced from the logical
requirement that events be simultaneously consistent that there cannot
be underlying mechanisms that generate those events that are
simultaneously inconsistent. It is analogous to inferring from the
observation that two teams cannot simultaneously win a game of
tug-of-war that one of those teams cannot exist, and then asserting
that a complete model of the situation is the static equilibrium state
in which a single team has won. This marvellous non-sequitur is
committed by those who criticise Marx for logical inconsistency. It is
a deep and seemingly pervasive philosophical error, maybe deserving of
a name, such as the fallacy of non-contradiction. (For if the law of
value and the law of equal profits are contradictory mechanisms then
reality is simply overdetermined and the sequence of events that in
fact obtain are a result of their mutual interaction in time.)

So the influence of positivism seems to be quite pervasive and
unhelpful in economics. I am sure there are more examples of this kind
of thing.

But a price theory that takes prior prices as a parameter is also an
incomplete theory of price, which is the rational ground of your
initial objection. I think you should label price theories that take
price as a parameter as incomplete, rather than incoherent.

I understood you to be claiming that a dynamic theory that includes
previous prices as a determining factor for current prices is not a
theory of price. I have pointed out that if price affects price than a
complete price theory must have this feature, and this pattern is
found in other models in other scientific domains, such as evolution
and many kinds of feedback control systems. I am less interested in
debating the details of particular TSS theories. I am more concerned
to explain the necessity of dynamic models for a complete
understanding of the meaning of price and value.

I have enjoyed our discussion and have learnt from your very valuable


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