# [OPE-L:6270] Historical, real and current costs (all 3 examples)

andrew kliman (Andrew_Kliman@CLASSIC.MSN.COM)
Sat, 14 Mar 98 18:40:55 UT

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From: owner-ope-l@galaxy.csuchico.edu on behalf of Duncan K. Foley
Sent: Wednesday, March 11, 1998 9:10 AM
To: ope-l@galaxy.csuchico.edu
Subject: RE: [OPE-L] Historical, real and current costs (Example 1)

I think I understand what Duncan wrote, but maybe not, because I don't
understand how it answers my objection. One issue seems to be the valuation
of existing assets, so let me try an example *without* constant capital and
ask how Duncan (and other proponents of the simultaneist ["flow"] MELT) would
compute surplus-labor and profit.

Take a single day. Assume that workers work 100 hours and produce 100
widgets, the only commodity. Through 9 p.m., the price per widget is \$1. The
workers quit work at 5 p.m., get paid \$99 for doing their day's work, and use
this money to buy and consume \$99/(\$1/widget) = 99 widgets -- all before 9
p.m. At 9 p.m., the price per widget falls to \$0.98. The widgets finish
drying (they need to be dry before anyone will buy them) after 9 p.m.
Moneybags then takes them and sells them, before midnight.

This is not a continuous-time model, but neither is it a period model. It is
no model at all. It is intended to be a set of *facts*, actual, observable
events. (We would never observe these particular facts, of course, but why
make things needlessly complicated?) It is not a stand-in (model) for a
broader class of situations; it is one particular actual situation. I've
tried to eliminate all unnecessary theoretical assumptions and categories.

If I understand Duncan correctly, every model does violence to the facts on
the ground. I agree with this. So, I'm not asking him (or other proponents
of the simultaneist ["flow"] MELT) to fit the facts above into a model.
Rather, I'd like to know how, using these facts, they would compute profit and
surplus-labor, and what figures they would obtain. Also, will the amounts of
profit and surplus-labor vary with changes in the post-9 p.m. price of the
widgets?

Another issue concerns changes in price during a "period" (in a "period
model"). However, my second and third examples can be understood as ones in
which prices are *not* changing during the period. They were *internal*
critiques of the simultaneist MELT.

The second example showed that the simultaneist MELT implies that profit can
be negative although positive surplus-labor is extracted -- without prices
changing (or, equivalently, when profit is computed using replacement prices).
The third example showed that the simultaneist MELT implies that the
magnitude of surplus-labor can be a *positive* function of (money and real)
wages. Again, this is so even without changing prices (or when profit is
computed using replacement prices).

Do proponents of the simultaneist MELT accept these demonstrations? If not,
why not?

Ciao,

Andrew Kliman