There is another thing that is confusing me. Varoufakis gives me these equations about an economy made up of a grain sector and a cattle sector. He sets the wage at one and the grain sector at one and then gets cattle prices that are 1.3x higher than grain and determines a rate of profit too. This is amazing. Then he doubles labor productivity in the cattle sector and tderives new relative prices and a new profit rate, which is higher. But how do I know that I can stay solvent as long as it takes the economy to get to the higher profit rate. There could be an outbreak of competition among firms in the cattle sector and prices could fall relative to costs especially for the non-innovative firms, so the profit rate could fall for most of the firms for some time before we arrive at a new equilibrium profit rate, no? Is this called traverse analysis? Why is the new equilibrium profit rate more important than the experienced profit rates in the traverse especially if we'll never get to that equilibrium profit rate given that the objective conditions determining it will have changed before we get there? There seems to be something oddly Platonic about equilibrium profit rates, no? LR
On Fri, Mar 12, 2010 at 6:00 PM, Lakshmi Rhone <[email protected]>wrote: > Hi > I was just looking at this interesting book by Yanis Varoufakis and he > talks about something called a pure production model proposed by PIero > Sraffa. > It seems quite powerful, so I am thinking here we have equilibrium prices > determined by the objective conditions of production, once distribution is > settled. OK let's say we start there. > But then I am thinking that the objective conditions of production are > going to change, and the rates of change will differ in sectors due to > their respective rates of labor productivity growth (or rates at which > productivity is growing in the sectors that supply their respective means of > production). > So then if I am to understand how exchange ratios are changing I can't but > refer to labor productivity and thus abstract labor time, no? > So how does value become redundant? > Lakshmi >
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