[OPE] Linear transformation between equilibrium prices and labour values

From: Jurriaan Bendien <jurriaanbendien@online.nl>
Date: Wed Dec 08 2010 - 13:36:33 EST


Thank you for the ref. Your analysis is admirable, and your results look
striking and significant - though at this stage I have to say I have not yet
studied the paper's data in detail. It brings to mind one of Bukharin's

But what interests me now is, what the explanatory power is of the model.
Where does description of the relationships between a configuration of
empirical trends end, and causal explanation begin? What does the
explanation look like?

It seems that the "overall dynamic" implied for the system is described as
the tendency for a configuration of variables to devolve on a stochastic
equilibrium. How do we know this? Because certain crucial relationships
between variables for observables, identified by theory, stay constant, so
that we can fit them to an equation and, thus, are able to predict certain
outcomes - a sort of enlightened empiricism. But the assimilation of a
series of random phenomena to stochastic laws suggests the idea that change
is explained either as a devolvement towards a statistically defined steady
state or else as a deviation from a steady state.

In his Bundesbank speech on January 13, 2004, US Federal Reserve chairman
Alan Greenspan, stated:

Globalization has altered the economic frameworks of both developed and
developing nations in ways that are difficult to fully comprehend.
Nonetheless, the largely unregulated global markets do clear, and, with rare
exceptions, appear to move effortlessly from one state of equilibrium to
another. It is as though an international version of Adam Smith's "invisible
hand" is at work."

Your research goes quite some way to provide the comprehension, and explain
what the "invisible hand" consist of. In that sense, you go one better than
Mr Greenspan. One might of course dispute how "effortless" the transition
from one state of equilibrium to another (however defined) actually is, but
what does the statistical view tell us other than that change is defined and
explained as the transition from one state of equilibrium to another? What
if qualitative and quantitative change is perpetual, and the equilibrium is
merely an analytical benchmark? What if the data produced itself smoothes
out empirical irregularities, since its very production frequently involves
interpolations and extrapolations based on the law of averages? The argument
seems to be, that the chance that the empirical result is due to chance is
very small, but what exactly does this prove - that the empirical result
bolsters the validity of the chosen abstractions?

BTW I haven't denied the utility of equilibrium analysis altogether. In
previous posts I have like Alejandro merely pointed to many different
equilibrium definitions, distinguished between correlation and causation,
and distinguished between the equilibrium of people's lives and the assumed
equilibrium of price variables.


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Received on Wed Dec 8 13:38:04 2010

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