There is a difference between what use people DO make of a theoretical framework and what use COULD BE made of a theoretical framework. And this difference is part of what fuels the Skillman/Ajit debate it seems. But it is also true that certain theoretical frameworks LEND THEMSELVES MORE READILY to certain uses than others -- and certain abuses as well. In this vein I have always appreciated the Sraffian framework for a use it lends itself to that I consider very important. Namely: Wage rates and profit rates are determined by important factors that are either absent from or disguised and buried in politically counterproductive ways in almost all uses of GE theory -- particularly in Arrow Debreu type form- ulations. Since it IS NOT THE CASE that wages and profits depend only on the relative supplies of different kinds of workers and different willingness to save relations, and on the number of buyers and sellers in different labor markets the GE "story" is very misleading as usually told. The personal characterisitcs and attitudes and group relations of employees have an effect on wages and effort levels. There is such a thing as the bargaining power between employers and employees which is influenced by a host of factors -- labor market conditions, political conditions, etc. -- but also by individual and group employee character- istics that are NON CONCEPTS in the GE framework. The usual use of the GE framework implies there is no role for those factors to play -- at least when the economy equilibrates. This is not true and debilitating. Gil can point out that there are no concepts in the Sraffian model that refer to these important factors in wage/profit determination. And he would be correct. BUT the Sraffian framework is more self-consciously limited. It screams out that something other than the analysis you are being presented goes into determining the wage/profit ratio. That anyplace on that wage profit frontier is technically possible, and where we will be, and therefore what the comodity price system will look like depends on forces that are impossible to model and analyze in the same kinds of ways. GE theory sends just the opposite message. Can GE theory be made to tell an accurate story? See, I know where you're going Gil! Well, it is probably possible. But for now I have a shorter way to tell the same story you MIGHT be able to pull out of a GE framework. Namely, a conflict theory of the firm and wage/profit determination story based on game-theory is the most important way to understand how wages and profits come to be what they are. Wealth ownership and exit options are all part of the description of the game. End of theoretical exercise 1. Once we see what wage/profit distribuition is likely we can explain the determination of relative goods prices with Sraffain theory -- focusing on the big part of the story which is cost of production rather than demand influenced factors. The Sraffian part of the story, theoretical excercise 2, is seen as the least difficult and least interesting part of the whole -- a kind of competent mopping up exercise. One last note: Different theoretical models DO lend themselves more or less readily to particular uses and abuses. The GE model probably IS a model that lends itself very easily to a de-politicization of the story about how and why the economy operates the way it does. Consumer beware there is no FDA protecting you -- although your pen-l comrades are not a bad voluntary substitute for government regulation!
