From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Fri Jun 09 2006 - 05:31:26 EDT
Ian ---- You are unfortunately still mixing up a price with a quantity. The price of money-capital, like any other price, has nothing to do with time, but the quantity of money-capital supplied and the profit income received of course does. > Note that this does not imply that a capitalist can supply > money-capital for a nanosecond and receive its price. > -------------- > Paul > > At this point you are surely conceding that what you call > the price of money capital has dimension t^-1 > ------------------ No. Here I am talking about a quantity of money-capital not the price of it. Paul ---- Ian you have to be aware that you are introducing some new and unfamiliar meanings to terms here. The normal definition of a quantity of money capital is just X pounds not X pounds for Y years. If you define capital as value / time, you are using the term in a way that is quite unconventional, and probably incompatible with your definition of commodity capital. It looks to me as if when faced with a problem about the 'price of money capital' you are redefining capital so as to make interest a price. Note the implication here value = persons * hours so persons * hours/years = persons/2000 which means that capital is defined in terms of fractions of a person. This only makes sense when dealing with the flow composition of national output, it does not make sense when dealing with capital stocks. > -------------------------- > Continuing with the dimensional analysis: in Sraffa's model quantities > are measured in units of commodity-type. So quantities of the > money-capital commodity are measured in money units. If we wish to be > explicit about the length of time represented by the production period > then the dimensions are money units per unit of time. > --------------- > Paul > No this is not right. The production rates are in units of tons > of corn per year. The prices are in oz of gold per ton of corn. > The revenue flow from sales is tons of corn /year x oz gold / ton corn > and hence oz gold per year. Replace gold with "money units" and you are re-stating my paragraph. It is not clear to me which part of my paragraph you thought was not right. Also, there isn't a money-commodity, such as a gold sector, in the circular flow. Introducing one would be an interesting exercise. ------------------------ Paul If there is no money commodity how are you able to talk of money capital? ------ Ian The profit income doubles. The rate of profit, ie. the price, stays the same. You need to distinguish between the rate of profit and the receipt of profit income from quantities of money-capital supplied, a price from a quantity. I provided a simple dimensional analysis. If there was a problem, you should have been able to point to it. > It is important to distinguish the flow rate of profit from the > stock rate of profit. Not in Sraffian single production, in which there are no stocks that exist across production periods. This is an extraneous matter given the model type we are discussing. ---------------------- Paul This all stems from your taking a quite different dimension for capital than I and almost all other Marxian economists do. We generally treat capital as being a stock of money, or convert it using the MELT to a quantity of person hours. You treat capital as a flow. This is quite contrary to the whole historical background which gave rise to the debate on the transformation problem. In Ricardo the problem was to explain why things like wine put away to mature rose in price compared to this years wine. The argument was that the wine represented a stock of value which had to earn a return similar to the general rate of profit or rate of interest. It has generally been assumed that in dealing with the transformation problem one has to deal with stocks of fixed capital. Sraffa certainly recognises this and that is why he goes on to introduce joint production. That is the means by which stocks can be represented in his system. -------------- >> In the circular flow model there is both working-capital and >> commodity-capital. However, there is not an identifiable "point in >> time" when a firm both owns the working-capital and the >> commodity-capital that was bought with it. That would not make any >> sense. > The point is that each capitalist is both a buyer and a seller. > If one capitalist buys inputs another sells them, on average > they are all buying and selling at the same time. The rate will > be stochastic, the deviations in cash balances from the mean > will be subject to noise with a Poisson spectrum. I'm sorry but I have to say that this is mumbo-jumbo in the context of the original point. ------------------- Paul What I am trying to say Ian is that the time step analysis of Sraffa is an approximation to a continuous flow analysis as one decreases the size of the timestep. If one accepts that, then one can 'stop the clock' at any point in the process and get approximately the same picture subject to stochastic noise. In accountancy practice, this 'stopping of the clock' is done annually or quarterly. If one looks at the accounts of a firm at any such instant, their capital account breaks up into a number of categories per example: Assets Liabilities Fixed capital £10,000,000 Stocks of raw materials £ 1,000,000 Stocks of work in progress £ 500,000 Cash £ 2,000,000 Payments due for goods delivered £ 3,000,000 Payments due for goods received £ 3,100,000 -------------------------------------- Net assets £13,400,000 The firms need to keep a part of their capital as money capital in order to buffer themselves for the variation in times at which bills fall due. If profit equalisation occurred, which of course I donít accept, but if it did, then the firm will want to earn say 10% on its full £13,400,000. Sraffa, advisedly I think, did not introduce the concept of money capital to his analysis. You are explicitly doing so, in that case it has to appear in your accounts. You say: <<there is not an identifiable "point in time" when a firm both owns the working-capital and the commodity-capital that was bought with it.>> At all identifiable points in time firms hold both cash and commodities. The money never goes away, it is conserved. It may move from one firm to another, but it never vanishes. If you are drawing up profit equalising accounts that money capital has to appear somewhere. You can not invoke money capital as a concept and then omit it from your accounts.
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