From: Ian Wright (wrighti@ACM.ORG)
Date: Thu Jun 15 2006 - 16:14:27 EDT
Hi Ajit I missed this older message of yours. Sorry for the long delay in replying. > But if 'beans' are "blocking goods" then obviously > they are basics, no? No. That's the reason for the problem. Blocking goods can exist in the non-basic sector. (See Abraham-Frois and Berrebi's 1997 book.) > The whole problem arises only if 'beans' are non-basics'. > In that case, they cannot be "blocking" the growth of > the basic sector. Yes, they cannot block the growth, which is why the problem arises. > In your example, there is no > surplus--because you redefine 'surplus' as necessary. > Thus by definition there is no 'non-basics' in your > system and the 'beans' problem simply becomes > meaningless. Exactly. This is why the circular flow representation of Sraffa's price equation does not suffer from this theoretical problem. The basic/non-basic distinction, in the context of modelling a state of self-replacing equilibrium, is purely an artifact of persisting with a metaphor of an undistributed surplus. An undistributed surplus interrupts the circular flow and fractures the economy into sectors with feedforward (basics) but not feedback (non-basics) relations. But in a state of self-replacing equilibrium the surplus is distributed. This is another example of how applying Sraffa's surplus equations to a self-replacing economy can lead to errors, in this case a problem of negative prices. Best wishes, -Ian.
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