# [OPE-L:5234] Re: Censoring Ajit?

andrew kliman (Andrew_Kliman@msn.com)
Tue, 10 Jun 1997 13:13:54 -0700 (PDT)

[ show plain text ]

A reply to Ajit's ope-l 5228.

Ajit: "One set of numbers are 1:1 price ratio and 33.3% rate of profit. And
as I had pointed out in my response, this is the correct set of numbers."

No it is not. I showed that it is not in my ope-l 5146 and why it is not.
However you are measuring prices (it doesn't matter how), if the relative
output price of period -1 is 1/2 and the input prices of period 0 must equal
the output prices of period -1, then the relative input price of period 0
cannot be 1/1. You need to try again.

Ajit: "In your 'challenge' example there are two time periods, (-1-0) and
(0-1), and not just one. So what you are
talking about is two transactions and not just one, but you still want to
maintain that the 'prices' of inputs for both the transaction periods must
remain the same even when the 'prices' have changed."

Certainly not. Let me clarify. There are three production periods, -1, 0,
and 1. These each take place over some *interval* of time. The output of
period -1 emerges at the same *moment* of time that the inputs of period 0 are
employed. Call this *moment* (-1,0). The output of period 0 emerges at the
same *moment* of time that the inputs of period 1 are employed. Call this
*moment* (0,1). The output of period 1 emerges at the *moment* (1,2). Hence
the production period 0 spans from (-1,0) to (0,1), and the production period
1 spans from (0,1) to (1,2).

The tautology is that the prices at *moment* (-1,0) must be the same for the
outputs of production period -1 and the inputs of production period 0, and
that the prices at *moment* (0,1) must be the same for the outputs of
production period 0 and the inputs of production period 1. Both of us agree
that this is necessarily the case. The term "tautology" is yours.

*I* certainly do not maintain that the prices at *moment* (-1,0) must be the
same as the prices at *moment* (0,1). It is YOU who maintains this when you
say that the input prices of production period 0, i.e., the prices of *moment*
(-1,0), must equal the output prices of production period 0, i.e., the prices
of *moment* (0,1). (You must maintain this, because nothing other than prices
change between production period 0 and production period 1 and, according to
you, the prices therefore cannot change. Hence, the input prices of
production period 1 must equal the input prices of production period 0. This
is the same as saying that the prices of *moment* (-1,0), must equal the
prices of *moment* (0,1).)

The challenge is to for you to show this proposition -- which is YOUR
proposition -- is compatible with the tautology and auxiliary conditions.

Ajit continues: "This is not a tautology, but a simple mistake."

Damned straight.

Ajit: "No good theoretician would ever maintain the condition of yours."

Well, again, it is not what I maintain, it is what YOU maintain. You are
either not a good theoretician or you are a good theoretician who has made a
simple mistake.

Ajit: "This time you come up with a term "non-price determinants of prices",
which supposedly remains the same for the two transaction periods. This you
think is your trump card, and you suggest that since I do not understand this
sophisticated theoretical concept, I make many mistakes. But I'm sorry to
inform you my friend, there is no such thing as "non-price determinants of
prices" in this whole universe, and there cannot be one. Prices cannot be
expressed in anything else than something which itself has price."

You misconstrue. To say that the non-price determinants of prices do not
change simply restates the original situation you posed at the ASSA in New
Orleans: "nothing in the world changes" between two periods (except prices);
therefore (you claim), the prices of these periods must be the same; "you
cannot have a theory of prices that determines prices from prices."

Ajit: "The set of your prices in the current year is determined from the set
of prices in the previous year. This leads to the infinite regress of the
determinants of prices in the current year. To avoid this, you arbitrarily
assume that some time in the past the prices of inputs and outputs are equal.
You have not defended this arbitrary assumption, which amounts to internal
inconsistency of your theory. And once you relax this arbitrary assumption,
there is no way out of the infinite regress. That's why I say, you cannot have
a theory of prices that determines prices from prices."

First things first. You have also said, and in fact this was your FIRST
criticism, that if nothing in the world changes between two periods, the
prices (both input and output prices) of the two periods must be the same, and
therefore "you cannot have a theory of prices that determines prices from
prices." I.e., in neither period can the input and output prices of the
period differ. It is that criticism that we are presently discussing. I
painstakingly proved you were wrong, but you apparently didn't understand, so
I decided that argument and explanation were no longer of any use, and that
you'd have to prove it to yourself. Hence the challenge.

Ajit: "I cannot believe that you think that your so-called challenge is still
on!"

Believe it. You have still failed to produce a set of numbers that acquits
your price theory of internal inconsistency.

Andrew Kliman