[OPE-L:4864] FW: Re: Sraffa's Non-Proof

andrew kliman (Andrew_Kliman@msn.com)
Thu, 24 Apr 1997 10:40:28 -0700 (PDT)

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I am resending this post, which I first sent last night, and which seems to
have gotten lost.

Andrew Kliman
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A reply to Ajit's ope-l 4844.

Ajit thinks I'm suggesting that Sraffa made a "silly mistake." I am not.
I've merely proved that he failed to demonstrate that, given an economy with a
surplus that undergoes simple reproduction and has stationary exchange ratios,
there is a unique rate of return on capital advanced. And that's all I've
ever claimed.

We can debate whether Sraffa was referring to a mythical economy without
"dollars," or whether he intended his constructions to have some bearing on
actual economies. That would make for an interesting discussion, perhaps, but
note well that I and Ajit have been talking all along about "an economy,"
i.e., any economy.

Note well also that I first raised the issue with Ajit in connection with
actual economies. In ope-l 4639, Ajit wrote:

"Wouldn't you agree that in a capitalist economy we find that prices of most
of the commodities remain more or less stable for reasonable amount of time?
When prices begin to fluctuate drastically, it amounts to some kind of crisis.
In normal
situation people, i.e. producers and consumers, capitalists and workers, go
about their daily business with a sense of stability in the prices. This
particular empirical fact has led most of the economic theorists to ask the
question: what is it that determins these prices, because they don't seem to
be arbitrary."

Note well that the context is "a capitalist economy." Indeed, our own
actually-existing capitalist economy, complete with "empirical fact[s]." Not
a hypothetical economy in which prices *would* remain stable, but a real
economy in which they allegedly *do* remain stable. Not a theoretical
construction in which people *would* have "a sense of stability in the
prices," but a real economy in which they allegedly *do* "go about their daily
business" with such a sense.

To make the point even clearer, let me quote my response in ope-l 4671:

"Which prices are 'these prices'? Actual prices, which are not stationary?
The prices that people 'sense,' which you haven't shown are stationary either?
Or imaginary prices corresponding to an imaginary stationary state?

"The answer to what determines the latter is extremely simple: the imaginary
stationary prices do not change unless technology, real wages, or relative
profit rates change because they are *postulated* not to change; these
imaginary prices are "determined" solely by technology, real wages, and
relative profit rates because that has been *postulated* to be the case.

"For instance, Sraffa fails to prove that, in an economy with a surplus, there
is only one set of exchange ratios that permits simple reproduction to take
place together with equalized rates of return on capital advanced. Nor does
he prove that there is a unique uniform profit rate in such a case. I
demonstrated this
in my paper 'The Okishio Theorem: An Obituary,' which I know that Ajit knows,
because he was a presenter on the same panel at the ASSA in January at which I
presented it."

Hence, I was fully aware all along that one can postulate imaginary conditions
in which "prices do not change unless technology, real wages, or relative
profit rates change." My reference to Sraffa's non-proof has been posed from
the beginning as an example ("For instance") of a result WHICH APPLIES TO SOME
IMAGINARY ECONOMY, BUT NOT NECESSARILY TO AN ACTUAL ECONOMY.

Ajit's response in ope-l 4844 implicitly concedes this. In response to my
demonstration that the profit rate measured as a ratio of $ can be lower than
Sraffa's 25 0f prices fall between time of input and time of output, Ajit
notes that there are no $ in Sraffa's hypothetical construction. This tacitly
acknowledges that the profit rate is not determined solely by technology, real
wages, and relative profitability in the actually-existing capitalism in which
I live, which uses U.S. dollars, or the actually-existing capitalism in which
he lives, which uses Australian dollars, or the actually-existing capitalism
in which he lived before, which uses Canadian dollars. It thus tacitly
acknowledges that I was right when I stated that Sraffa had failed to prove
the proposition in question.

I'm happy to let Ajit pursue his theory, in which the profit rate is
determined solely by technology, real wages, and relative profitability, given
only that he makes clear that the results of that theory do not necessarily
apply to any actual economies, and that such results cannot be used as
"proofs" that propositions concerning actual economies are false. Agreed?

The profounder point which Ajit raises in his latest post, which John also has
related to, is the notion that only relative prices matter. In a two-good
world, there's only one relative price, as Ajit notes; thus, in a one-good
world, there are no relative prices. And so, if 4 bushels of seed-corn yield
5 bushels of corn output, the profit rate must be 25 0n Ajit's theory.
WHETHER THIS TAKES PLACE THROUGH THE INTERVENTION OF HUMAN LABOR OR NOT IS
IRRELEVANT. (This is the real meaning of the notion that "value is redundant"
in the physicalist outlook.) Corn is the substance of value, and the profit
rate is the rate of self-expansion of corn. Profit grows on trees. In this
sense, I agree with Alejandro Ramos' remark that David's reply to him is a
"fruitful" basis for discussion :-)

All this brings to mind Marx's reaction to Ricardo's profit rate theory: he
"fless economics to seek refuge in organic chemistry" (Grundrisse, p. 754).

Andrew Kliman