Gil's response to Ajit, Part 2. My comments to follow are basically
tailored elaborations of my prologue, with a few interesting
exceptions--e.g., concerning Ajit's claim that the context underlying
the Sraffian system is supplied by Marx's _CAPITAL_. I suggest
reasons to doubt this. Comments marked by > are from Ajit; I've
edited them for brevity's sake.
>In my earlier posting, I showed surprise at Gil's characterization
[of the Sraffian model as just a GE system with a lot of stuff left
out--GS]
> and reminded him that the three basic aspects of the GE model, namely: (a)
> demand and supply functions, (b) a linear logic of production, i.e. from
> "factors of production" to "consumer goods", on the basis of which the GE model
> DERIVES the demand for the "factors of production", and (c) marginal reasoning
> are all categorically rejected by Sraffa and his followers. And as I understand
> it, without these elements the GE model would be vacuous. So in what sense one
> can characterized Sraffa and his followers works as "just a GE system, without
> explicitly admitting it"?
> Gil chose not to take up these theoretical issues systematically.
The hell I didn't. But first, notice condition (c) above is new--it
wasn't in Ajit's original description of requirements for a GE model,
I checked--and it's wrong. Walrasian GE models, taking Arrow-Debreu
as one possible standard, do not require "marginal reasoning" at all.
Separating hyperplane theorems allow one to specify equilibrium
conditions while taking nary a derivative. [That's the reason I
thought Jim Craven was mistaken in focusing so narrowly on
"marginalist reasoning" as the basis for his critique of mainstream
economics, by the way.]
So the point of contention reduces to whether models must
*explicitly* incorporate (possibly derived) demand and supply curves
in order to qualify as GE models. And to this I say, of course not.
Reason (and here, I'm simply referring back to my earlier post, to
the answers I supposedly didn't give):
A GE model without (possibly derived) demand and supply functions
may leave a lot of stuff out, but it is by no means vacuous, as Ajit
suggests. Consider the Sraffian conditions: equalized profit rates,
equalized wage rates, the law of one price for all commodity prices,
aggregate input use == aggregate production of the input commodity,
etc. These are very strong conditions. They do not hold in general,
on either theoretical or empirical grounds. So in imposing them, one
is substituting individual behavioral conditions--which translate
into demand and supply functions in a price-taking world (which by,
the way, the Sraffian system also implicitly assumes, or NONE of its
assumptions would make any sense)--with *systemic* behavioral
conditions. But they're still behavioral conditions, and they're not
vacuous. Furthermore they allow strong implications. For instance,
the "wage-profit frontier" of Sraffa-land is well-defined only if one
posits one economy-wide wage, one economy-wide profit rate. Without
these and like assumptions, no definite results from Sraffa-land.
> Instead, he goes on to attack the Sraffian "model" as highly restrictive, rigid
> , weak, etc. etc., and insists that the assumption of uniform rate of profit
> and real wage necessarily implies the existence of the GE model. This is a
> fantastic argument, something i have never come across in my studies of
> economic theory; and, in my arrogant opinion, I don't think I'm all that badly
> educated. It would be very interesting to learn how an assumption of equal
> profit and real wages must imply a GE model underneath? If I remember correctly
> even Frank Hahn and Paul Samuelson never made this argument in their failed
> attempt at incorporating Sraffa into a GE model.
[I must confess I don't really care what Frank Hahn and Paul
Samuelson argued, or failed to do, and nor do I see how this is
relevant, but onward....]
> I don't know the source of Gil's understanding of Sraffa and his
>followers' contributions. My impression is that it is not based on
>a serious study of their works. And this is something I did not
>expect from Gil Skillman.... Along with Sraffa's PCMC and
>"Introduction" to WORKS VOL1, you may want to look up Garegnani's
>1984 paper in OXFORD ECONOMIC PAPERS and his reply to Frank Hahn's
>'the neo-Ricardian' paper...
There is no question of arrogance here, just as there is no doubt
about the balance of scholarly credentials in this area: Ajit
certainly has a deeper background than I do. For example, I've read
neither of the articles he cites. I've read Sraffa's PCMC,
Pasinetti's Lectures, Mainwaring's and Steedman's books, and
otherwise just a fairly unsystematic harvest of papers over the years.
However, I give my reasoning for interpreting the Sraffian model as a
GE system based on its preconditions, and Ajit manages to ignore the
argument entirely! So, with scholarly credentials or without, here
it is again:
On what grounds does the Sraffian system impose the conditions of
equalized profit rates, equalized wage rates, the law of one price
for all commodities, etc., if not utter whimsy? There are two
possible answers: first, that the purpose is to mimic the main
features of the Walrasian system while demonstrating that other
results don't necessarily hold. This is a logically possible
argument, but it's not a very good one, for several reasons I'll
discuss in a separate post if people are interested. [But a key
reason is that the Walrasian system does not guarantee these
conditions without additional specifications.]
Besides, Ajit disavows this when he traces the roots of the Sraffian
system to classical economic theory--an inference I agree with. But
therefore--
The second answer is that they are economy-wide equilibrium
conditions. No other interpretation seems possible. And if one were
to ask, on what possible grounds could such strict conditions be
justified, **any logically defensible story would involve statements
about demand and supply, even if these statements are not built
explicitly into the model.** For example, equalized profit rates are
produced by shifting "supplies" of capital across markets, in search
of relatively high profit rates, a process that in the absence of
differential risk and imperfect capital markets would result in
equalized profit rates. A similar story would be required to justify
equalized wage rates, the law of one commodity price, etc, etc.
Furthermore, the Sraffian system *requires* such conditions in order
to generate any definite results. For instance, the wage-profit
frontier is only well defined if there's a single wage and profit
rate in the economy. Without all these conditions, nothing in
particular emerges.
Thus I conclude: if we are not to understand to Sraffian system as
utterly arbitrary, and if it is to yield interesting results, it must
be understood as a (minimalist) general equilibrium system. One with
a lot of stuff left out.
> For the general reader, let me try to explain the nature of
>Sraffa's
> contribution as briefly as my limited ability would allow. The subtitle of
> Sraffa's PCMC is A PRELUDE TO THE CRITIQUE OF ECONOMIC THEORY, where economic
> theory stands for neo-Classical economics. It is not Sraffa's intention to
> develop a "model" or a "system" to explain how the capitalist
>economy works.
Intention or not, it *is* a model and it *is* a system.
> Instead, his purpose is quite limited and highly ingenious. He develops a set
> of basic propositions from which not only a through critique of neo-Classical
> economics can be generated but also it rehabilitates what he calls "classical
> approach", which in his opinion is fundamentally different than the
> neo-Classical economics. in the history of thought literature the two approachs
> are known as "surplus approach" and "scarcity approach" respectively.
>
> "Surplus Approach" does not begin with individuals with GIVEN endowments. The
> whole question of GIVEN is quite problematic in itself. In the case of labor,
> the endowment of labor adjusts to the employment opportunities, i.e.
> unemployed labor over time either dies off or migrates out of the
>system...
Such considerations, by the way, are by no means foreign to a dynamic
GE model, so I'm hard pressed to see how this is a special point for
the Sraffian approach.
> And in the case of capital, Keynes has already
> shown that capital stock adjusts to income rather than can be taken as given.
> For surplus approach, no given endowments, no demand and supply functions.
> So what is "surplus approach" economics? The surplus approach
economics
> suggests that the basic variables of the capitalist economic system are NOT
> determined in "MARKETS". The real wage is determined by social and historical
> forces, and not demand and supply of labor. For Adam Smith "common humanity"
> and a social code of what one must and must not do played an important part
> in determining the real wage. For Marx, real wages can remin different in two
> districts (you heard it right Gil!) [I don't recall denying this,
even implicitly]
>because of the differences in material
> conditions of life attained by the two districts before the proletariat came
> into existence. Similarly the technique of production and the length of the
> working day are also determined by social and historical factors.
As I discussed in my prologue, I feel that this reference to "social
and historical factors" resolves nothing, and certainly does nothing
to support the comparative superiority of the Sraffian--or classical--
or "surplus"--approach.
1) A wage, by its nature, is a market outcome.
2) Market outcomes are surely influenced by "social and historical
factors", but the results are still market outcomes, whether in
competitive or noncompetitive markets. Thus incorporating demand and
supply (or, more generally, strategic behavioral) conditions into an
equililbrium model commits no necessary methodological sin, even in
the face of such factors.
3) Conversely, *excluding* supply and demand (or strategic
behavioral) conditions earns no merit points on methodological
grounds. Telling me that wages are the outcome of social and
historical forces, without telling me the context in and the logic
by which they are determined, tells me precisely nothing.
By way of contrast, a Walrasian general equilibrium is just a special
case of a non-cooperative Nash equilibrium. The mainstream approach
would be to build these "social and historical" factors into the
social interaction being analyzed, and then seeing what equilibrium
emerged.
4)*Nobody*in Walras-land would disagree that "the basic variables of
the capitalist system are NOT determined in 'MARKETS'." For instance,
"endowments" depend on the distribution of property, which is
determined outside of the system. So once again, I'm hard pressed
to see how this is a special point in favor of the Sraffian approach.
Basically, the only difference is that the latter leaves a lot more
out of the formal story, while implicitly claiming that this lack
of formal analysis is somehow a methodological strength.
>In
> Althusserian lingo, we could say they are historically "overdetermined". Given
> these three basic variables determined by social forces, the total net output
> is also determined; and given the real wage, a net surplus of output appears
> in the system. Thus, the surplus is the outcome of social forces and not the
> market forces of demand and supply of "factors of production". Sraffa's system
> of production is circular and its basis is Marx's reproduction schemas. For
> simplicity sake, Sraffa keeps his system to simple reproduction schema. In this
> framework, the role of the MARKET is only to assign prices to commodities so
> that socially determined variables can be reproduced from one period to ano
ther
This is methodologically unacceptable, an attempt to have one's cake
and eat it, too. To Marx, labor power is a commodity, just like the
production inputs in Sraffa's system are commodities. So how can one
justify the dichotomy that the price of labor power is mysteriously
the product of "social forces", utterly independent of labor markets,
while for the other commodities, "the role of the MARKET is ...to
assign prices ...."? Why isn't the price of coal, of bread, of
spinning jennies, of cotton gins, ad infinitum, determined by "social
and historical forces", outside the Sraffian model? On what grounds
can the Sraffian system pretend that the latter commodity prices are
market-determined entities while the price of that special commodity,
labor power, is not? Apologies, but this sounds like double talk.
> . Since capital mobility and equal rate of profit has been a theoretical
> assumption of Classical, Marxian, and neo-Classicals alike, and since Ricado's
> labor theory of value had gotten into problem on this this theoretical proposit
> ion, Sraffa gives us a solution of a set of prices that must prevail for the
> system to reproduce itself with equal rate of profit. (To claim that Sraffa
> stands or falls on the critical assumption of equal rate of profit is to put
> Sraffa on his head. One should remember that the writings of the young Sraffa
> in his 20's inspired the whole imperfect competition business.) Thus in the
> Sraffian system, the MARKET, the quintessential ideology of the bourgeoisie, is
> relegated to its proper place: as a facilitator in the reproduction of the
> bourgeois relations and not the DETERMINING institution.
1) Equal rate of profit is NOT an assumption of these various
schools. It is a *result*, which holds only under very special (I
would say equilibrium) conditions. Ricardo does not say, Smith does
not say, "Let us assume an equal rate of profit", they argue for its
achievement given a sufficiently long time horizon and given
sufficient capital mobility. In other words, it's an equilibrium
result premised on certain supply conditions of capital.
2) I do not say, and I have not said, that _Sraffa_ stands or falls
on the condition of equalized profit rates. But his PCMC system
does. Imperfect competition, however much Sraffa thought about it in
the 20's,doesn't enter even implicitly into this model.
3) By no stretch of the imagination is the "MARKET...the DETERMINING
institution" in even the most aridly abstract Walrasian system, which
after all takes such key conditions as property distribution,
technology, and preferences outside the system. So let's agree that
"social and historical forces" determine these, and then agree that
there's nothing special about the "surplus" or Sraffian approach in
this regard.
> Gil asks for the longer or the bigger story of Sraffa's "system". The bigger
> story can be found in CAPITAL. Sraffa was quite clear about it and had no
> intention of rewriting CAPITAL. As Gilles Dostaler reports:
> "Sraffa told us that he would not have been able to write PCMC if
Marx had not
> written CAPITAL. It was clear, he told us, that he had been strongly influenced
> by the work of Marx, and that he felt more in sympathy with him than with those
> he called the 'whitewashers' of capitalist reality. Obviously aware of the
> criticism directed against him in certain Marxist circles, Sraffa explained to
> us that it was not his job to rewrite the three volumes of CAPITAL. Moreover,
> Sraffa believed that his model described some aspects of the same reality that
> had been described by marx, a reality characterized by class antagonism
> between workers and capitalists, and the exploitation of workers by capitalists
> ."
This brings all, or at least most, of the pieces together. Ajit's
argument here encounters a fundamental dilemma:
EITHER
1) CAPITAL cannot be considered the "bigger story" behind the
Sraffian system, because the latter does not incorporate Marx's
central problematic, the distinction between labor and labor power;
OR
2) CAPITAL can be considered the "bigger story" behind the Sraffian
system, despite the latter's failure to explicitly incorporate the
labor-labor power distinction; but in that case, as Roemer has
demonstrated in detail, ***the Walrasian system that Sraffa is
supposedly indicting can do everything the Sraffian system can do,
and more***.
[NOTE TO MIKE LEBOWITZ, JIM DEVINE, ET AL.--I'M NOT RESTARTING THE
FIGHT OVER ROEMER HERE, GUYS! IT'S AN IF-THEN ARGUMENT! THAT'S ALL!
HONEST!]
In Roemer's (Walrasian) system, *at least as much as in the Sraffian
system*, wages are the product of "social and historical forces", are
not to be understood as returns to "marginal products"; profits are
equivalent to exploitation; capitalists exploit, workers are
exploited.
But of course, because it doesn't "leave stuff out", Roemer's
Walrasian account can do much more than the Sraffian account: he can
show the equivalence of profit and exploitation even under factor
substitution, and the isomorphism between profits and interest as
outcomes of exploitation,for example. [More examples upon request.]
Thus, the long-awaited bottom line:
1) The Sraffian system can be understood as a GE system simply
because it imposes conditions which make no sense except in the
context of a (minimally stated) economy-wide equilibrium.
2) The Sraffian system gets no merit points for leaving all that
other stuff out, in favor of some vaguely defined, but theoretically
unexplored, matrix of "social and historical forces", because
courtesy of Roemer, we know that a Walrasian model which leaves the
details in can make all the critical claims about capitalism that the
Sraffian system can, avoids making the uncritical claims (like w =
MP) that the Sraffian system avoids, and can yield additional
critical insights with respect to which the Sraffian system must be
silent....
.....because it leaves all that extra stuff out.
Nuff said. Gil [[EMAIL PROTECTED]]
