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

From: Fred Moseley (fmoseley@MTHOLYOKE.EDU)
Date: Sat Sep 22 2007 - 12:55:04 EDT

Quoting ajit sinha <sinha_a99@YAHOO.COM>:

> Well, I tell you put 2 and 2 together and you tell me,
> well you keep telling me to put 2 and 2 together but
> don't tell me how much do they make. In the earlier
> mail I explained to you that you don't understand that
> *rate of profit* has time dimension. The word "rate"
> should give one the clue that this must be in relation
> to time. But it seems you have not grasped this idea
> yet. In your above example, you have an industry which
> has a rate of profit equal to 25% per year and another
> sector has a rate of profit more than (and not equal
> to) 50% per year. Now, you must know that Sraffa takes
> rate of profits to be equal for all the sectors. So,
> now you should see that your example has nothing to do
> with differences in turn over periods but it is rather
> giving different rates of profits to different
> sectors. Now, classical economists including Marx
> assumed that there was something called a gravitation
> mechanism ("a law of value") in the market that
> ensured that the rate of profits are equalized for all
> the sectors. Sraffians think that Sraffa also relied
> on the classical argument in assuming equal rate of
> profits. I think that equalization of the rate of
> profits is a logical result of any complex system of
> basic goods as long as the system is not interfered
> with from outside (such as some kind of price control
> etc.). But in any case, how is it a criticism of the
> Sraffian system that it does not solve the price
> equations with arbitrary rate of profits for different
> sectors? The confusion is in your head not in Sraffa's
> theory. I'm sorry to be responding so late--I was
> taking vacation in Créte (Greece) for a week, which
> was great! Cheers, ajit sinha

Hi Ajit,

I certainly understand that the rate of profit has the time dimension.
That is my point.

Sraffa's system of equations determines a single rate of profit for all
industries.  Therefore, if this rate of profit is to apply to the same
period of time, all industries must be assumed to have the same
turnover period.  It's as simple as that.  Conversely, if industries
are assumed to have different turnover periods, then the single rate of
profit determined by the system of equations will be for different
periods of time, which means that their rates of profit will be
different for the same period of time (e.g. a year.

What's so hard to understand about that?


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