My response to Gil continues...
Gil continues:
>Ajit continues:
>
>>So what does this mean? It means that the two
>>theoretical worlds are wide appart. The GE framework does not get away from
>>what Sraffa called a "one way avenue", ie. a linear theoretical structure
>>which goes from 'factors of production' to consumer goods production.
>
>For reasons given above, this distinction is necessarily specious.
_______________
Ajit:
Where is the reason given above? As I have explained above, this is a
fundamental methodological difference between the two theories.
_________
Gil:
>
>>Consumption is the final *goal* of the theory. So the theory is ahistorical
>>through and through. It is a solution to a problem generated by axiomatic
>>*nature* of man. The Sraffian theoretical framework is circular. It is
>>interested in the question of *reproduction*-- consumption is simply a
>>moment in the reproduction of the system.
>
>Ajit's anthropomorphic wording, which suggests the bizarre notion that
>theories, i.e. formal analytical structures, can somehow *themselves* have
>"goals" and "interests" (as if my copy of _Production of Commodities by
>Means of Commodities_ could express an "interest" in going out to lunch),
>effectively illustrates my point that the differences he cites between the
>two systems have mostly to do with the "goals" and "interests" of their
>respective adherents, not with the systems themselves.
>
>It is nonsense to suggest that consumption is the "goal" of the Walrasian
>framework, since this suggests that "theories" can have thoughts and
>feelings. But even if they could, consumption is no more or less the "goal"
>of the Walrasian framework itself than it is for the Sraffian. It is true
>in both cases that production takes place, and that production is necessary
>for consumption. It is true in both cases that if people did not consume,
>production would be unnecessary.
___________________-
Ajit:
That's very smart of you Gil, and my hat's off to you for that! Any reader
with minimum sympathey would understand what I'm saying there; which is that
the GE theoretical paradigm is rooted in human subjectivity. The purpose of
production is considered to be consumption, and not accumulation. This is a
theoretical, and not just an ideological, difference between the two
theories. People produce in order to consume and people consume in order to
produce are not the same thing. As Marx said, accumulation for accumulation
sake; production for production sake is the reason behind capitalist
production. M-C-M' is necessarily a circular circuit. And this is what is
reflected in the title of Sraffa's book, 'Production of Commodities by means
of Commodities'.
_________
Gil:
>
>> Thus it is historical through and
>>through, since it does not allow the framework to be draged into a mythical
>>origin or the begining.
>
>Again, there is nothing about the formal Sraffian framework *itself* which
>is any more or less "historical" than the Walrasian system, with the
>important difference that since the Sraffian framework ignores the operation
>of time in market exchange (by Ajit's own advertisement), it ignores this
>particular slice of "history." And again, in no relevant sense does the
>Walrasian system deal in "mythic origins".
_______________
Ajit:
What is this "formal Sraffian framework *itself*", which no Sraffian has
ever heard off? There is no such thing. In the very Preface of PCMC Sraffa
says: "The investigation is concerned exclusively with such properties of an
economic system as do not depend on changes in the scale of production or in
the proportions of 'factors'. This standpoint, which is that of the old
classical economists from Adam Smith to Ricardo, has been submerged and
forgotten since the advent of the 'marginal' method." Sraffa's reading of
classical theory suggested to him that classical theory divided itself into
three parts: a theory of distribution, a theory of value or prices, and a
theory of accumulation. He believed in Ricardo's dictum that the subject
matter of economics is so complex that it does not lend itself to a long
chain of deductive reasoning. Only short chains of deductive reasoning could
be applied. Thus the connections between the three departments of the theory
cannot be established by some functional relations of quantitative nature.
Their relationships are qualitative and overdetermined in nature, to use an
Althusserian term.
Sraffa's price system was designed to establish the classical theory of
prices, which was independent of human subjectivity, and dependent on
distribution determined in a socio-historical context. This price theory
also proved that the neoclassical theory based on long chain of deductive
reasoning was flawed. So your talk of a "formal Sraffian model" is simple
nonsense.
__________
Gil:
>
>> Now, my question is this: Gil, do you think that a
>>skilled man can always turn a straight line into a circle?
>
>Ah, a riddle. I can do no better than respond with riddles of equal meaning
>and relevance to this discussion. Take your pick:
>
>What is the sound of one hand clapping?
>
>How many angels can dance on the head of a pin?
>
>Who is John Galt?
>
>Why do fools fall in love?
>
>What have they done to the rain?
>
>(And, in honor of Ajit's animalistic theme):
>
>How much wood could a woodchuck chuck if a woodchuck would chuck wood?
_________________
Ajit:
To a serious theoretical question, which must have been clear to everybody
by now, I get the answer: "How much wood a woodchuck chuck if a woodchuck
would chuck wood". Such poverty of response I certainly had never expected.
__________
Gil:
>
>Ajit continues:
>
>>Gil Claims:
>>>As for the claim that "[d]emand can have any influence on the prices of
>>>goods only via its influence on the distribution of income", this is clearly
>>>not true in general.
>>_______
>>
>>Are you saying that Samuelson's non-substitution theorem is wrong. If not,
>>then that's exactly what Samuelson's theorem says.
>
>Ajit's claim here is incorrect and/or irrelevant for a number of reasons.
>First, as you can see above, I said that Ajit's original argument "is
>clearly not true in general." Invoking Samuelson's non-substitution cannot
>possibly rebut this assessment, since the conditions of the theorem are
>decidedly NON-general: specifically, it assumes (only) one non-produced
>input no joint production, and constant returns to scale.
___________
Ajit:
My claim is correct. You may not understand my claim, but that's a different
matter. What the simplyfying assumption of no joint production and only one
non produced input has got to do with the point I'm making? It could only
facilitate the understanding of the problem.
__________
Gil:
>
>Second, since the conditions of Samuelson's theorem allow my case--i.e. that
>the real wage is invariant to relative prices--it can't possibly be used to
>refute my counter-example.
__________________
Ajit:
Your case was the case of reverse L-shaped labor supply curve. For the life
of me, I can't understand how could you get a *supply curve* of labor in a
n-commodity Arrow-Debreu General equilibrium model, let alone a reverse L
shape of it. This must involve a great magic trick. I trick I would very
much like to learn, if Gil would pass on the secreat.
The fact of the matter is that all kinds of neoclassical models have serious
problem dealing with unemployment. Because their concept of competition is
different from classical concept. In the neoclassical concept of
competition, if there is excess supply of any commodity, its prices must be
bid down. And if excess supply continues then prices must come down to zero.
Let me quote one of the grand dadies of neoclassical economics, Robert
Solow: "I think they [feeling about equity and fairness] also come into play
as a deterrent to wage cutting in a slack labour market. Unemployed workers
rarely try to displace their employed counterparts by offering to work for
less; and it is even more surprissing... that employers so rarely try to
elicit wage cutting on the part of their laid-off employees, even in buyer's
market for labour. Several forces can be at work, but I think Occam's razor
and common observation both suggest that a code of good behaviour enforced
by social pressure is one of them." And he goes on to add that "the
structure of modern economics is inhospitable" to such ideas (Quoted from
Garegnani's 'classical versus marginal analysis').
___________________
Gil:
>
>Last but not least, Samuelson's non-substitution theorem does not state that
>"[d]emand can have any influence on the prices of goods only via its
>influence on the distribution of income", as Ajit suggests; it states rather
>that preferences and therefore consumer demand has *no* impact on prices.
__________
Ajit:
Not so fast Gil, not so fast! What is the implication of non-substitution
theorem? If you think that the assumption of constant returns to scale is
responsible (by the way, A-D model also assumes no increasing returns to
scale, so how general is that?) for Samuelson's curious result, then you
would be simply wrong. Constant returns to scale is the most general
assumption made in neoclassical economics. It does not mean that the supply
function is a horizontal st. line at the level of cost. Why? Because: let us
suppose demand changes in favor of capital intensive commodity. This would
increase the demand for capital vis-a-vis labor. The rental on capital will
rise relative to wages, and so the supply price of capital intensive good
will rise. That is, the effect of demand on prices takes place through
changes in distributional variables. Therefore, when you put a
distributional variable constant, demand ceases to have any effect on price.
This is an important result, because it proves the Sraffian point that if
you could determine distribution from outside of the price system, the
relevance of utility based price theory is over. And since the neoclassical
theory of distribution based on substitutability of 'factors' of production
is incorrect as shown by the reswitching proof, you are left with nothing to
hang on to.
Since it is getting too long. I'll send the rest of my response in the third
batch. Cheers, ajit sinha
