Re: [OPE-L] monetary macro interpretation

From: Fred Moseley (fmoseley@MTHOLYOKE.EDU)
Date: Fri Jun 02 2006 - 09:32:39 EDT

Hi Ian,

Thanks for your comments.  I haven't had a chance to read your paper yet,
but I hope to soon.  What you say has some intuitive plausibility.  Since
money capital is missing entirely from Sraffian theory, it is no surprise
that this omission could cause serious problems.


 On Wed, 31 May 2006,
Ian Wright wrote:

> Date: Wed, 31 May 2006 11:27:57 -0700
> From: Ian Wright <wrighti@ACM.ORG>
> Subject: Re: [OPE-L] monetary macro interpretation
> Hi Jurriaan and Fred,
> In fear of opening a hornets' nest ...
> > "These two aggregate equalities are not conditional
> > equalities, that may or may not be true, depending on the compositions of
> > capital of individual industries (as in the standard interpretation of
> > Marx's theory), but are instead identities, that are always true, by
> > assumption, or by the nature of Marx's logical method - the determination
> > of the total surplus-value prior to its distribution."
> >
> > Fred's description has got to be correct basically, but I would say that the
> > two aggregate equalities are true "by assumption", specifically a modelling
> > assumption made to understand a complex reality. Lateron both Marx and
> > Engels qualified that assumption:
> The neo-Ricardian critique is that under conditions of simultaneous
> determination those aggregrate identities do not hold. As I understand
> it, Fred does not cast his theory under conditions of simultaneous
> determination.
> However, the neo-Ricardian critique is based on a real-cost accounting
> error, specifically the omission of the labour-value of money-capital.
> Once that accounting error is fixed all Marx's aggregrate identities
> hold in the case of simultaneous determination.
> The mistmatch between Marx's theory and simultaneous determination has
> often been noted on this list. I would like to add another mismatch:
> in the special case of simple reproduction in a state of
> self-replacing equilibrium, prices of production are proportional to
> labour values.
> In general, both Marxist and neo-Ricardian political economy have
> maintained price-value divergence due to profit-rate equalisation.
> They have differed over the aggregrate conservation of value in price.
> But in the (very) special case of simultaneous determination, in which
> the modern debate on the transformation problem has focussed, the
> shared premiss of both sides of the argument is wrong: there is no
> price-value divergence and there is aggregrate conservation. The
> transformation problem is the inverted appearance of an underlying
> labour-cost accounting error. Sraffian labour-cost accounting is
> non-conservative due to its omission of the labour-cost of
> money-capital. This is why those value and price aggregrates don't
> match up in the neo-Ricardian representation of Marx's theory.
> Clearly this is all very counter-intuitive to those schooled in the
> transformation problem, and I don't expect to be able to convince
> others of these points immediately.
> I think you are right to emphasise that perfect conservation of labour
> cost in price can only hold at a particular level of abstraction. But
> that does not mean that gaining a perfect understanding of this level
> of abstraction is not important.
> Although I have not studied this question in detail, I'm pretty
> certain that Fred's macro-monetary interpretation will now hold under
> conditions of simultaneous determination, once conservative
> labour-cost accounting is adopted. However, I'm not sure whether Fred
> and others will balk at the denial, in the special-case,
> "Bortkiewiczian" conditions, of price-value divergence due to
> profit-rate equalisation. There's quite a bit of thinking and talking
> to do.
> > Pedagogically, we can point up the problem here by asking the question, "how
> > do national accountants get from observed PRICES to a macroeconomic
> > aggregate of "gross VALUE added"? which is a kind of inverse transformation
> > problem.
> That's an interesting question. I have zero expertise in national
> income accounting. Why not divide the total price of the net product
> by the average wage rate?
> Best wishes,
> -Ian.

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