Re: (OPE-L) Ajit's paper

[Rakesh Bhandari <rakeshb@xxxxxxxxxxxx>]

Title: Re: [OPE-L] (OPE-L) Ajit's paper

Ajit,

I look forward to reading your paper (and there is the one in Westra, et al.). A few quick points.

1. The money commodity should not be treated as any other commodity in a set of simultaneous equation: more than the the average rate of profit will tend to be secured in this branch (see Michelle Naples on absolute rent in the precious metal sector), and there is no mechanism by which to affect supply such that the average rate of profit will have been made in the "money branch" over the long term (see my OPE-L posts, based on my reading of Ricardo and Malthus: http://archives.econ.utah.edu/archives/ope-l/2002m08/msg00045.htm; http://archives.econ.utah.edu/archives/ope-l/2002m08/msg00059.htm). Fred Moseley has of course written on this (see his website).

2. I read the paper a long time ago, and just skimmed it.  Sen makes a good point. Sraffa's demonstration deals a blow to the parables taught in introductory economics, but it should not  be understood as a theory of the actual determination of output, prices and the profit rate or as a method for calculating on the basis of given physical data and a distributional parameter what equilibrium prices actually are. The equations have no such real world predictive value.  He also reiterates from his late 70s CJEd piece th distinction between mathematical and real determination but seems to have an allergy to Marxian value theorists, so does not cite Shaikh on the matter. If understood outside its context, the Sraffian equations appear an arid formalism because there is no way to introduce money and dynamics into them (that's how I would put it); but if one understands the purpose of the equations to be a Gramscian critique of popular ideology, then they serve their function.

3. Whether one wants to dismiss marginal utility theory on the basis of an positivistically illicit use of counterfactuals, the underlying realities on which Marx's theory of value is based are not counterfactual.

4. While Hahn questions the assumption of input and output prices as equal in order to enter demand considerations to close the equations, Giusanni, Freeman and others question that assumption in order to put technical change into the formalism. That seems to me to be the real fight--about how and why to drop the static assumption in the Sraffian formalism when it comes to studying actual capitalist economies, ie. when one is doing more than critiquing popular mythology about the productivity of capital and profit as just reward. Sen implicitly recognizes Hahn's point but pays no attention to the Marxian criticism. But that's where the action is.

Rakesh