Re: [OPE] classical macro dynamics and the labor theory of value

From: Anders Ekeland <>
Date: Mon Jan 31 2011 - 14:17:36 EST

Hi Ian and Jurriaan.

Very interesting discussion. Jurriaan has already replied, making
some very important points. But I think the discussion could be more
to the point if one introduces the question of reaction speed.
Because if the equilibrating forces never do get us fast enough to
eq. before the eq. point (or attractor) changes again, then you have
to have a theory of the "moving target", i.e. the moving eq./attractor.

So far I have not seen any formal modelling of such an eternally
moving eq. point. Mathematically it is possible, there is a (too!)
developed formalism of hitting moving targets. The military have tons
of missiles that chase other missiles using control theory (Kalman
filters etc.). But in economics this type of models are underdeveloped.

>This is semantic. I take "natural prices" to refer to those prices
>that obtain when there is no profit incentive to reallocate capital in
>circumstances of constant technique and final demand.

The problem that Jurriaan points to here is that the same forces that
drives you towards eq. - the forces of competition also continuously
changes the technique and the preferences.

>I think you are mixing up lots of issues here. It's important to
>understand that an attractor of a dynamical system (an "equilibrium")
>can exist and have real effects without the system ever converging to
>it. So it's a mistake to collapse what is real to what empirically
>For example, consider a lecture hall with a
>thermostatically-controlled heater and cooler. Someone sets the
>thermostat to 60 degrees. The air-conditioning kicks in. The room
>warms up. People enter and leave. Doors open and shut. A window is
>left open, and it's midwinter.
>We measure the time-series of the temperature of the room over the
>course of the day. The data shows that the temperature never
>stabilizes to 60 degrees but fluctuates erratically about a much lower
>temperature. Should we conclude from this empirical data that no
>mechanism is working to drive the system to 60 degrees? Or that, if
>the doors and windows were shut, we can confidently assert that the
>temperature will continue to fluctuate?

The problem here is that the value of the thermostat is continuously
changing. The thermostat might change in an orderly way so that you
can have a theory of the moving attractor. Given that we can estimate
the *reaction speed* we could get - if not an equilibrium theory, so
at least a theory of "non-crisis" path of development - like the
golden decades after the 2nd WW.

In addition and you never get the doors and windows shut, but if
their can be estimated we might get some real results from the model(s).

The problem with *static* equilibrium models is that they are limited
- since capitalism is inherently dynamic, inherently disequilibrium.

>You might also consider what instability means. Unstable systems are
>transient -- they blow up or fall apart. Yet market economies have
>reproduced themselves for many hundreds of years.

You are right - capitalism still exist - it reproduces itself - but
on a ever expanding diseq. path with periodic crisis (not regular,
not repetitive) - so the meaning of non-constant technology
equilibrium and corresponding prices is not still clear to me.

>Having said that, I do think there are important sources of
>instability in capitalist economies.

Problem is not that there are "sources" of instability - but that
they are the same as the equilibrating forces, i.e. the un-cordinated
- not mutually consistent from the outset - actions of individual firms.

>But a complex system consists of
>multiple interacting mechanisms -- to make progress in theoretical
>analysis you must "hold some things still". That is the rationale for
>counterfactual reasoning. But you'll be disappointed if you expect to
>make immediate contact with empirical reality. Is it even possible to
>understand or read Marx's Volume 1 without this understanding?

I agree that to hold things still might be useful, but we have been
waiting for the full story for more than hundred years - so one might
ask if not economic modelling should start with modelling real
competition, real change of technology - because it has shown itself
extremely difficult to modify these models to make them dynamic afterwards.

The problem between Cap. vol 1 and 3 - the transformation problem has
shown itself very resistant - although Farjoun and Machower,
your work, the TSSI - points to another and hopefully more fruitful
research agenda - but I think Jurriaan is correct in stressing that
using static models to model "moving attractor systems" with slow
reaction speeds for the eqilibr. processes compared to technological
development is a real problem.


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Received on Mon Jan 31 14:20:48 2011

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