First substantive remarks: On Sraffa-Steedman
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1. There is no doubt a nice Latin name for the fallacy of seeking to
defend one's own position by attacking one's opponent's.
Nonetheless I will open by doing exactly that. Why? Because there
is considerable truth in the dictum "It takes a theory to beat a
theory"; and I think that skepticism among progressive economists
concerning the LTV has as one of its bases this sort of thought: Why
conjure with the primitive Ricardo-Marx LTV -- at best only a first
approximation -- when for the same price (i.e. at the same sort of
level of abstraction) one can have the *correct* (i.e. Sraffa-
Steedman) theory? I wish, therefore, to undermine this thought. (Of
course, if the only thing that could be said in favor of the LTV is that
the Sraffa-Steedman theory is faulty, this would not cut much ice.
But please remember what I said about the provisional suspension of
disbelief: there *are* positive arguments to be made too.)
2. Although theorists may sometimes be inclined to forget, the
equalized rate of profit is NOT a fact. It is, however, an assumption
that is absolutely crucial to all theories of Sraffian derivation.
Farjoun ("Production of commodities by means of what?" in Mandel
(ed.) Ricardo, Marx, Sraffa) is able to show, for instance, that many
Steedman-type examples, of the sort used to demonstrate the frailty
of the LTV, fall apart and become economically meaningless given
the slightest deviation from this assumption. (Yes, Marx assumed an
equalized rate of profit too, when producing the concept of prices of
production, but the point is that this assumption is *not* crucial to
the LTV as such -- more on this later.)
3. What IS a fact, is that the distribution of the rate of profit in
capitalist economies is quite wide, and broadly stable over time.
Yes, there are forces working in the direction of equalization, but
there are complementary forces working in the direction of dis-
equalization; and the joint outcome of these forces seems to be an
"equilibrium" degree of dispersion of profit rates (with different
capitals occupying different places in the distribution at different
times). (Farjoun and Machover, Laws of Chaos, Verso, 1983)
4. It is therefore not at all obvious that a theory based centrally on
the assumption of an equalized rate of profit has any claim to
*correctness*, to the status of a benchmark against which the
deficiencies of the LTV may be assessed.
5. The greater the equilibrium dispersion of profit rates, the worse
are Sraffian prices as approximations to actual prices -- or even to
their "centers of gravity," discounting the effects of short-run supply-
demand disequilibria. On the other hand, on the maintained
hypothesis of an equalized rate of profit, the greater the dispersion of
the value composition of capital, the worse are labor-values as
approximations to actual prices. Since both of these distributions are
non-degenerate, the question of whether Sraffian prices or labor-
values offer the better systematic approximation to actual prices is an
empirical one. The evidence to date shows, with remarkable
consistency across data-sets drawn from different capitalist
economies and different time periods, that the two approximations
are *roughly equally good*. It is not the case that labor-values are a
crude first approximation, and Sraffian prices a clearly superior
second approximation.
I have made this point before, but I wanted to set it out
systematically before developing its implications.
End of second posting.
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Allin Cottrell
Department of Economics
Wake Forest University
[EMAIL PROTECTED]
(910) 759-5762
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