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

From: Ian Hunt (ian.hunt@FLINDERS.EDU.AU)
Date: Tue Sep 18 2007 - 01:25:21 EDT

```Dear Fred,
Well you do on the Sraffa model need as many
equations as there joint products. Incomplete
goods are not a problem (Sraffa -or Schefold-
deals with them also) and, of course, the prices
are book prices for depreciated fixed capital and
part constructed products. If the framework works
they will hold for the more complicated case, I
would have thought. But you might be right if you
are suggesting that it is not the most elegant
framework for dealing with varying turnovers of
constant capital,
Cheers,
Ian

>Quoting Ian Hunt <ian.hunt@FLINDERS.EDU.AU>:
>
>>Dear Fred,
>>I am a bit puzzled by this: the Sraffians have a model of the profit
>>rate per 'year', with joint products dealing with inputs that are not
>>entirely 'consumed' in a 'year'. The 'year' can be set as the least
>>turnover period of capital to deal with variations of turnover
>>periods, where the turnover periods are less than an astronomical
>>year. You then have to calculate the annual rate of profit from the
>>rate of profit per 'year', which involves compounding the 'yearly'
>>rate of profit over the no of 'years' annually,
>
>
>
>I think that you are confirming what I have been saying about Sraffian
>
>As I understand you, all industries are assumed to have the same basic
>turnover period, which is equal to the least turnover period.  Inputs
>that are not entirely consumed within this period are treated as joint
>products.  Treating these longer lasting inputs as joint products in
>effect assumes that all industries have the same turnover period (the
>“least turnover period”), and all inputs are turned over in this
>period.  The “joint product” method in effect turns all fixed capital
>into circulating capital, and assumes an equal turnover period of
>circulating capital in all industries.
>
>So it is not only fixed capital proper (lasts longer than the actual
>turnover period in each industry) that is treated as a joint product,
>but also circulating capital proper (consumed entirely within the
>actual turnover period of each industry) in all industries whose
>turnover period is longer than the “least turnover period”.  That’s a
>lot of “joint products”.
>
>And what happens if the turnover period in an industry is 1.5 times as
>great as the “least turnover period”, or any number that is not a
>multiple of the “least turnover period”?  The “joint product” method,
>which was used by Sraffa WITHIN a single industry (to convert fixed
>capital to circulating capital within a single industry), seems to
>break down when used ACROSS industries (to convert unequal turnover
>periods of circulating capital in all industries into the “least
>turnover period”).
>
>But this is not all.  In all industries with turnover periods greater
>than the “least turnover period” (i.e. most industries), not only are
>the inputs not entirely consumed, but also the products are not fully
>produced.  How does the theory deal with these incomplete products?
>
>Ian, do you think that real-world equilibrium prices are determined
>simultaneously at the end of each and every of these “least turnover
>periods” (including the equilibrium prices of the inputs as “joint
>products”), as this theory suggests?  Wouldn’t prices be different
>depending on the length of the “least turnover period”?  And wouldn’t
>prices change if the “least turnover period” changed?  Is this
>plausible?
>
>I would argue instead, based on Marx’s theory, that real-world
>equilibrium prices are determined by costs plus the average rate of
>profit.  Costs are taken as given, and the average rate of profit is
>determined by the labor theory of value.  Costs are calculated over the
>actual turnover periods in each industry, not over the “least turnover
>period” in the economy.
>
>Thanks again.
>
>Fred
>
>
>----------------------------------------------------------------
>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
```

This archive was generated by hypermail 2.1.5 : Sun Sep 30 2007 - 00:00:05 EDT