Re: [OPE-L] models with unequal turnover periods

From: Ian Hunt (ian.hunt@FLINDERS.EDU.AU)
Date: Sat Sep 08 2007 - 20:58:43 EDT

Dear Fred,
My paper explicitly refers to the turnover period 
of capital in industry i, so that implicit in 
that is the possibility that. It is not the same 
as Medio's. It is based in fact on Brody and I 
only follow Medio in taking prices to be prices 
per unit of value (Medio's theory is does not 
distinguish between fixed and circulating by 
making the assumption you mention).
The turnover of capital in industry i = the 
turnover of fixed capital in i plus the turnover 
of period of constant capital in i plus the 
turnover period of variable capital in industry 
i. These turnover periods are not assumed to be 
equal across industries in any of these cases. I 
get turnover periods by distinguishing between 
stocks and flows. The rate of profit, of course, 
is the annual rate of profit on my model but it 
can rise and fall because of changes in turnover 
periods. Thus one counteracting tendency to the 
tendency of the rate of profit to fall is that 
the turnover period of constant and variable 
capital in some industries declines, due eg to 
"just in time" inventories of parts. The 
applicability of "just in time', of course, 
varies between industries.

I don't think that my model makes any assumption 
about when commodities are exchanged, although it 
does assume that the rate of profit on capital is 
a temporal rate. It does make some idealizations, 
of course: prices per unit of value are really 
averages of a range of prices per unit of a range 
of values, etc. The assumption that the price of 
inputs is the same as the price of outputs is 
based on the fact that purchases and sales of a 
product intermingle, so that the price of a 
commodity as an input and its price as an output 
will be determined on the same day for at least 
some firms.

Turnover periods are different because different 
stocks of money capital are required to generate 
different sorts of flows: relating the 
distinction between stocks and flows to exchange 
is just confusing: in fact, for really small 
turnover periods (less than 1, say, if a year is 
taken as the reference point) you have to have 
stocks of capital replenished by sales that occur 
in shorter periods than a year (one of the bases 
of the separation between commercial and 
industrial capital is just that effect)

>Quoting Ian Hunt <ian.hunt@FLINDERS.EDU.AU>:
>>Dear Fred,
>>The paper is titled 'An Obituary or a New Life for the Tendency of
>>the Rate of Profit to Fall' and can be found in  Review of Radical
>>Political Economics, 15:1, 1983, pp. 131-148. It has got a few typos
>>in it (URPE did not in those days always return the text to authors
>>for checking) but these are relatively easy to sort out - if you have
>>any trouble let me know and I will tell you what they are supposed to
>>be. I am trying to produce a decent scanned copy: if I do, then I
>>will send that electronically, with typos fixed.
>>By turnover period, I mean the sum of the turnover period of fixed
>>capital plus the turnover period of constant capital plus the
>>turnover period of variable capital, which can of course all differ
>>and contain different variants. These differences are explicitly
>>taken into account in the paper.
>Hi Ian,
>The differences in turnover periods between fixed (constant) and
>circulating (constant and variable) capital are not what I am talking
>about.  Rather, I am talking about the differences in turnover periods
>of circulating capitals in DIFFERENT INDUSTRIES.  These differences are
>not taken into account in your paper.  Your paper is based on Medio’s
>model which explicitly assumes an equal turnover period in all
>industries.  Medio wrote (p. 332):  “Consider an economy of n
>industries, each of them producing a given amount of a single commodity
>in a GIVEN INTERVAL OF TIME, let us say a YEAR.” (emphasis added)  This
>is the assumption I am talking about.
>And my point is that this is a necessary assumption in Sraffian theory
>because, if there were unequal turnover periods, then the rate of
>profit determined by the simultaneous equations would be equalized
>across different turnover periods, which in turn would imply unequal
>annual rates of profit, contrary to the prevailing tendency.  Plus,
>simultaneous determination requires that all commodities are exchanged
>at the same time, which in turn requires that they all must have the
>same turnover period.
>This message was sent using IMP, the Internet Messaging Program.

Associate Professor Ian Hunt,
Dept  of Philosophy, School of Humanities,
Director, Centre for Applied Philosophy,
Flinders University of SA,
Humanities Building,
Bedford Park, SA, 5042,
Ph: (08) 8201 2054 Fax: (08) 8201 2784

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