Re: (OPE-L) Ajit's paper

[Ian Wright <iwright@xxxxxxxxx>]

Hi Ajit

> But these prices are determined by the determinants other
> than prices. That's why it qualifies to be a theory of prices. If
> they determined prices of a commodity in time t on the basis
> of observed prices of the same commodity in time t-1, then it
> would not be a theory of prices but rather be simple
> mumbo-jumbo, which is what TSS is.

Whatever the precise merits of TSS models your methodological
stipulation that a theory of prices must explain prices only by
reference to phenomena other than prices is unjustifiable.

I can only imagine that such a stipulation derives from a static
conception of reality, in which prices are conceived merely as
economic outputs, rather than being both economic outputs and inputs,
which have causal consequences.

In any system that supports feedback mechanisms an output signal at
time t can be an input to the mechanism at time t+1. This behaviour is
reguarly expressed in terms of differential or difference equations.

Control engineering is not formulated in terms of simultaneous
equations. If your methdological stipulation was applied to other
domains then the theory of control engineering would also be
"mumbo-jumbo". Again, it is a kind of ascetism to maintain that prices
cannot have causal consequences, but are simply output epiphenomena
that have only a nominal rather than causal role.

-Ian.