[OPE-L:5535] Re: Luxury Goods and Profit Rate

andrew kliman (Andrew_Kliman@classic.msn.com)
Fri, 26 Sep 1997 11:53:28 -0700 (PDT)

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(1) In ope-l 5532, Ajit writes:

"So the change in the technology in the non-basic sector only have its effect
on its own price and not the long-term rate of profit.

"No matter what you take as your measure of price, ... it will not change the
rate of profit in the corn sector as long as the ratio of net output (taking
wages as advanced capital)and wages plus seed corn remains the same, because
it is a pure number and independent of any measure of prices. It can change
only when technology or the wage rate changes."

Given that Ajit continues to make such statements without rising to my
challenge which puts them to the test, I reiterate my request that he do the
"simple class exercise" in Sraffian theory that I posted in ope-l 5484, and
which I now append. In particular, note not only that part (a) addresses
Ajit's claim that the profit rate is independent of nonbasic sectors, but that
part (b) addresses Ajit's claim that the measure of price will not affect the
profit rate in the corn sector.
Initially, 5 units of corn are used (as seed and wages) to produce 6 units of
corn. One unit of corn and 24 chickens are used to produce 30 chickens. The
simultaneist profit rate is 20%.

Now, imagine that the 6 units of corn can be produced using only 4 units of
(seed & wage) corn.

(a) Is the magnitude of the profit rate 50% -- "simply the ratio of net
output of corn divided by seed corn plus wage corn"?

If not, what justifies your claim that the profit rate is determined by
"physical quantities" alone? If that is not possible in this case, then isn't

it true that you lack a general theory? And if that is not possible in this
case, then why should I accept the claim that "physical quantities" suffice to

determine the profit rate in other cases? Why shouldn't I conclude instead
that there's something seriously wrong with your theory, because you've
*ignored* other determinants of profitability?

(b) If the profit rate is not 50%, what *is* its magnitude?
(i) assume that corn is the numeraire
(ii) assume that chickens are the numeraire

Note: I'm interested in the economy-wide (general) profit rate, not (only)
the sectoral rates.

(c) BONUS TEXTUAL QUESTION!!: According to Sraffa, how is it possible for
both the corn producers and the chicken producers to obtain a 50% rate of

(d) EXTRA CREDIT!!: Was Sraffa a "Sraffian"?

(2) Ajit tries to reiterate his view that the commodities in the Sraffa
equations are aggregates of heterogeneous use-values: "You think the idea of
differentiated product would kill his life long work and he wouldn't even know

This poses an interesting question, but it does not provide an answer to the
aggregation issue. However, I have already provided the answer in ope-l 5493
-- Sraffa's commodities are not aggregates. Since Ajit has neither responded
to it nor taken it into consideration in this latest repetition of the claim
that Sraffa's commodities are aggregates, I now append my answer:
"Paolo Giussani has noted that "[s]ince 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."

"In response [OPE-L:5483] , Ajit Sinha opined that "[s]ince Sraffa's equations

are equations for industries or sectors rather than firms, they obviously
contain differentiated goods. No slight change will make every product
'non-basics', that's simply silly."

"In other words, according to Ajit, Sraffa's system aggregates physically
distinct things.

"This, however, was definitely NOT how Sraffa understood his own equations.
a letter of 4th June, 1962, to Peter Newman, Sraffa wrote:

"'You find a further ground for attacking the distinction between basics and
non-basics in the supposition of its being 'partly a matter of the degree of
aggregation in the system' (p. 67 [of Newman's article]). Now aggregation is
the act of the observer, whilst the distinction is based on a difference in
OBJECTIVE PROPERTIES. I have argued, for instance, that a tax on the price of

basics will lower the general rate of profits for a given wage, whereas a
similar tax on non-basics will leave the rate of profits unchanged. Surely,
to answer this, one must prove the alleged consequence does not follow,
AGGREGATION [caps added].'

"Therefore the "commodities" of Sraffa's system are, according to the author

(1) NOT differentiated;

(2) classified according to their physical differences -- the "objective
properties" that distinguish one from another.

"Now, even "the slightest change in usevalue is enough to make a product"
*objectively* different from another. Indeed, when the change in usevalue is
"slight" or not "is the act of the observer," a *subjective* one. Therefore,
any change in use-value whatsoever means that we have a different "commodity"
in Sraffa's sense, a "novel product." And therefore Paolo is 100orrect:
"a very large part of products that come out of each different 'production
cycle' ... are novel products, and thus nonbasic products."

"In ope-l 5479, Ajit wrote: "I cared to know a bit of Sraffian literature,
had you shown the same care
before coming out with your gun blazing against Sraffa and the Sraffians you
would have known it too." Unfortunately, a bit of knowledge is a dangerous
thing. Sadly, Ajit seems not to have cared to know a bit more."

(3) Finally, Ajit writes:

"Let's suppose after every production cycle steel comes out little whiter than
the previous one from the steel mill. Now, as long as the steel mill needs to
use the same amount of this whiter steel per unit of output of still whiter
steel, as well as all other sectors that use steel in their production process
need to use the same amount of steel, how is this slight variation in the
quality of steel going to make any difference to Sraffian equations?"

The answer to this should be obvious to one who purports to be an expert on
Sraffa. Since commodities are distinguished by Sraffa according to their
"OBJECTIVE PROPERTIES," (a) the new steel in each "cycle" is a non-basic; (b)
the steel input in each "cycle" is not reproduced, i.e., does not appear on
the output side of the equations; therefore (c) there is an extra unknown with
no extra equations; and therefore (d) the system cannot be solved. The theory
breaks down.

In you can run but you sure can't hide solidarity,

Andrew Kliman