[OPE-L:5479] Re: Luxury Goods and the Rate of Profit

Ajit Sinha (ecas@cc.newcastle.edu.au)
Tue, 16 Sep 1997 23:51:57 -0700 (PDT)

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At 08:46 15/09/97 -0700, Paolo Giussani wrote:
>Anjit Sinha says that the 'long term rate of profit is of course determined
>in the basic subsystem alone'. Now the rate of profit of the Sraffa system
>has become the 'long term rate of profit'. How does Sinha know that it is
>the long term rate of profit? And what exactly is a long term rate of

The rate of profit of the Sraffian system has not "now" become the long
term rate of profit, but it has always been so. How do i know? Because I
cared to know a bit of Sraffian literature, and had you shown the same care
before coming out with your gun blazing against Sraffa and the Sraffians
you would have known it too. On page 9 of PCMC Sraffa writes: "A less
one-sided description than cost of production seems therefore required.
Such classical terms as 'necessary price', 'natural price' or 'price of
production' would meet the case, but value and price have been preferred as
being shorter and in the present context (which contains no reference to
market prices) no more ambiguous." You could also take a look at
Garegnani's paper entitled 'On a change in the notion of equilibrium in
recent work on value and distribution', in ESSAYS IN MODERN CAPITAL THEORY
(eds.) Brown, Sato, and Zarembka. You could also take a look at Garegnani's
recent paper entitled 'Quantity of Capital', published in the paper back
version of the New Palgrave's CAPITAL THEORY. These papers will tell you
"what exactly is the long term rate of profit".
I think it necessary to repeat my argument in a different way.
>We have three sectors, A,B,C, where A and B make up the basic subsystem and
>C is a nonbasic industry. Suppose that in C for any reason the sectoral
>profir rate rises above the A-B profit rate (the eigenvalue profit rate).
>The consequence, as Sinha himself acknowledges, are that a flow of money
>capital enters C coming from A-B. A new uniform rate of profit - higher
>that the A-B profit rate but lower than the increased sectoral
>profitability of C - gets established from this change and then stays there

Why should the rate of profit rise in the basic sector? What's your
argument, apart from your assertion. Let's suppose there are only two goods
in the economy: corn and body massage. Corn is used both as corn seed and
wages paid to the workers. And in the massage sector corn is used as wages
advanced to the workers who do the massaging. In this case given the
technology in the corn sector and workers wages in terms of corn, a rate of
profit will be established in the corn sector independent of all other
sectors. It is simply the ratio of net output of corn divided by seed corn
plus wage corn. This rate of profit cannot change unless technology or the
wage rate changes, no matter what's happening in the other sectors. If
there is competition then the other sectors prices have to adjust so that
their rate of profit comes in line with the corn sector's. Now in your
case, let's suppose the current rate of profit is higher in the massage
sector compared to the corn sector. So there will be more investment in the
massage sector such that its price in terms of corn falls to the extent
that its rate of profit comes down to the corn sector's rate of profit.
There is no reason for corn sector's profit to rise here. Do i need to go
on any further? I don't think so. Cheers, ajit sinha
How can one say that this, obviously long term , rate of profit is
>not determined by the nonbasic industry C too? You have to prove that the
>long term uniform rate of profit of the whole system, as calculated
>independently of the eigenvalue of subsyem A-B and, hence, only on the
>grounds of intersectoral capital flows, is equal to the eigenvalue rate of
>profit so that in the long run you can neglect these very displacements of
>When he says "You will have to make an argument as to why such resource
>allocation adjustment could have any impact on the long term rate of
>profit" Sinha is exactly reversing scientific reasoning. Where a uniform,
>long term profit rate comes from? From intersectoral transfers of capital:
>hence it is on his shoulder that falls the duty of showing how and to what
>extent this ceaeless movement is compatible with the Sraffian notion of
>eigenvalue profit rate ie the profit rate of the basic subsystem alone, and
>not on that of opponents of Sraffa theory to prove that the eigenvalue
>profit rate is not compatible with a continuous movement of capital flows
>(which thing is not very difficult indeed). The foregoing simple example of
>sectors A,B,C should anyway provide what Sinha requires.
>New goods as nonbasics
>In the same post, Ajit Sinha added
> " A novel product would of course be non-basic. However, to say that all
>products or a large part of products that come out of every production
>cycle are novel products would not be a very meaningful proposition. In
>such situation it would be hard to work on any REPRODUCTION schema. "
>Since the slightest change in usevalue is enough to make a product a novel
>product, looking at what happens every day I feel comfortable to state that
>a very large part of products that come out of each different 'production
>cycle' (Sinha uses this quite mysterious expression) are novel products,
>and thus nonbasic products. Sinha however think this can't be a 'very
>reasonable proposition', only because accepting it would make very hard to
>work any reproduction schema. I fear I have to remark this a kind of
>footbal fan way of thinking: if my team loses then soccer no longer can be
>considered a good game. He should have said instead: "... only because
>accepting it would make very hard to work out any reproduction schema
>WITHIN A SIMULTANEIST FRAMEWORK", since there is no problem in
>incorporating continuous technical innovation within a nonsimultaneist
>formalism as this is not founded upon a distinction between basics and
>With esteem,
>Paolo Giussani