# Re: [OPE-L] equilibrium and simultaneous vs. sequential determination

From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Sat Sep 15 2007 - 17:29:14 EDT

```Sraffa would never have made the assumption that both A and B return a profit of \$50

Paul Cockshott

www.dcs.gla.ac.uk/~wpc

-----Original Message-----
From: OPE-L on behalf of Fred Moseley
Sent: Sat 9/15/2007 3:36 PM
To: OPE-L@SUS.CSUCHICO.EDU
Subject: Re: [OPE-L] equilibrium and simultaneous vs. sequential determination

Quoting ajit sinha <sinha_a99@YAHOO.COM>:

> --- Fred Moseley <fmoseley@MTHOLYOKE.EDU> wrote:

>> Ajit, this is not my problem.  This is a problem in
>> Sraffian theory.
>> The problem, as I have explained in an earlier post,
>> is that Sraffian
>> theory (in which all capital is treated as
>> circulating capital, because
>> fixed capital is treated as a "joint product"), all
>> industries must be
>> assumed to have the same turnover period, if the
>> rate of profit that is
>> determined by the system of equations is to be
>> equalized over the same
>> period of time.  If, on the other hand, turnover
>> periods were not equal
>> across industries, then the rate of profit
>> determined by the equations
>> would be equalized for different turnover periods,
>> which would mean
>> that the annual rate of profit for different
>> industries would not be
>> equal, contrary to the prevailing tendency.
>>
>> For example, if a given capital in one turnover
>> period has a rate of
>> profit of 5%, and it turns over twice a year, then
>> it will have an
>> annual rate of profit of 10%.  If another capital in
>> another industry
>> also has a rate of profit of 5%, but turns over 10
>> times in a year,
>> then its annual rate of profit would be 50%.
>>
>> I hope this clarifies the problem.  Any suggested
>> solutions?
>>
>> Fred
> _________________________
> That definitely clarifies the problem, which is that,
> as I had expected, the problem is with your
> understanding of the problem rather than with Ricardo
> or Sraffa. Rate of profits is given in terms of period
> of time. Now a days banks compound your rate of
> interest on almost daily basis, if your bank tells you
> that the rate of interest on your deposit is 5%, then
> would you expect that your daily rate of interest
> should be (5x365)%? Why not just read Ricardo? He will
> solve all your problem. Cheers, ajit sinha

Hi Ajit,

What you continue to say about Ricardo and compound interest does not

Assume that \$200 is invested in industry A and industry B.  The \$200 in
industry A is recovered in 12 months, plus a profit of \$50, so that the
rate of profit for its turnover period is 25%, which is also the annual
rate of profit.

Assume that the \$200 invested in industry B is recovered in 6 months,
also with a profit of \$50.  So the rate of profit for its turnover
period is also 25%, but its annual rate of profit is 50% because it
turns over twice.

Please explain how compound interest solves this problem, i.e. how it
equalizes the annual rate of profit in these two industries with
unequal turnover periods.

Thanks,
Fred

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