Fred, Let me limit this post to clarifications and direct responses to your direct inquiries:
> In your last post, you did not respond to the main point of my argument > about the rate of interest – that it is *taken as given*, as one component > of the “price of capital”, and is not explained by marginal productivity > theory. Thus marginal productivity theory takes as given what it is > supposed to explain – the return to capital. It is an empty theory covered > up by calculus and by vague and misleading definitions of the “price of > capital”. Here's what I wrote early on about it: "Re. (4), if you state that (a) y = 1 + 2 x, that (b) z = 4 - x and that (c) y = z, you are not necessarily contradicting yourself. In general, obviously, y cannot be equal to z: (a) and (b) are very different equations. But, you can certainly find particular values of x, y, and z such that all these equations hold just fine, i.e. x*=1 and y*=z*=3. Again, this is not in general, but in particular -- at a "point," so to speak. So, no, you are *not* allowed to argue that equations (a) and (b) "assume" x while the point of the theory is to determine the particular values of x (i.e. x*) that reconcile the system. If you do, then the logical contradiction is yours." And also this note, where I refer back to the paragraph above: "Marginal productivity theory takes the rate of interest as given in order to derive the demand condition. There's nothing wrong with that. What is derived is a rule or function, which has to be reconciled with the supply side. I explained in a previous post why this procedure is perfectly proper." Let me put it more generally: How can you derive any conclusion about something if that something is not stipulated in the premises of your reasoning? Similarly: How can you determine the particular solution (value or set of values) of the endogenous variable in your theory if this variable does not appear as an argument in the equations that you intend to solve for your particular solution? You seem to be arguing that the MPT reasoning is a plain tautology like this: Premise 1: the return on K is x. Premise 2: the return on K is x. Conclusion: x=x. But that is *not* the MPT reasoning. Instead, it goes something like this: Premise 1: the return on K must satisfy demand conditions, namely x(K)=MPK, nontrivial (i.e. independent of y), Premise 2: the return on K must satisfy supply conditions, namely y(K)=i (given) nontrivial (i.e. independent of x), Premise 3: competition enforces x(K) = y(K). (This implies that x(.) and y(.) are not, in general, equal.) Conclusion: Under competitive conditions, MPK* = i* = r*(K). You may not agree with it, but this reasoning is logically consistent. > In Marx’s theory, on the other hand, the amount of profit depends on the > difference between the new-value produced by workers and the wages paid. New > value in turn depends on the product of the MELT and the quantity of > SNLT. That > is: > > Profit = (MELT)(SNLT) – wages > > Thus an increase of wages results in a $ for $ reduction of profit. > > So I spoke too strongly when I said that MPK is independent of wages. The > MPK does vary inversely on wages, but is a completely different way from > the relation between profit and wages in Marx’s theory. Of course it is different (seemingly so), because the assumptions about SNLT are different. In your equation, SNLT depends (I suppose, following Marx) on the level of the productive force of labor and the size of the social need for that commodity, two things you take as given. In other words, SNLT is *exogenous* in explaining the magnitude of surplus value. On the other hand, in the "neoclassical" story, SNLT is *endogenous*, as the size of the social need expands and contracts depending on prices (although, like in Marx, the productive force of labor is also taken as given). So, the "neoclassical" story accounts also for the feedback effect of wage changes on profit via the adjustment of SNLT. However, if you're willing to assume continuity, the effect in both stories turns out to be the same, at the margin. This follows directly from the envelope theorem: profit*(SNLT) = profit(wages, SNLT), where wages = wages(SNLT): d profit*/d SNLT = d profit/d SNLT | wages=wages*(SNLT) And I don't think that calculus obscures the theory. It reveals it the assumptions (and the logic) more sharply. > How does Q increase if both L and K remain the same? Magic? If L is > measured in terms of worker-days, then an increase in the hours in a > working day has no effect on the number of working days. K/L remains the > same and thus profit/wage remains the same. Which is contrary to Marx’s > theory, according to which an increase of the working day increases SNLT > and therefore increases the new-value produced and profit. > > On the other hand, if L were measured in hours in marginal productivity > theory, then capital inputs should also be measured in hours, so that an > increase in the working day would increase K and L by the same proportion > and thus would have no effect on K/L and profit/wages. Fred, You asked what happened to the production function if the working day increased. If the production function is in hours, then (obviously) nothing happens. The question is valid only if the input units are in working days, in which case the production function shifts upward altogether. Under the usual assumptions, if you use workers for 10 hours/day, then you are likely to produce more output that if you use them for 8 hours/day. So Q increases. Now, you say, expanding the working day from 8 hours to 10 hours entails that K also expands proportionally. Why? Aren't you smuggling again the notion of fixed proportions? Not warranted. > Julio, I obviously disagree strongly with your interpretation and > acceptance of marginal productivity theory, but I appreciate very much this > discussion, which had helped me see some of the issues more clearly. Likewise, Fred. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
