From: Paul C (clyder@GN.APC.ORG)
Date: Mon Jun 07 2004 - 18:25:34 EDT
Ian Wright wrote: >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". > > Ian, what one has to determine here is whether the system is stable under perturbation. One may accept that past prices have an effect, but expect that to be exponetially decaying with respect to time in comparison to the underlying causes of price. There may be recurrence relations in ones equations but one would hope that they are damped.
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