Julio, some replies below to your latest. On Thu, Jan 17, 2013 at 1:58 PM, Julio Huato <[email protected]> wrote:
> Fred, > > > Julio, I think you are confusing the price of capital and the rate of > > interest. The price variable that is determined in marginal productivity > > theory is the *price of capital*, not the rate of interest. The rate of > > interest is one component of the price of capital, along with a > > depreciation component, and in disequilibrium an entrepreneur’s profit > > component (= 0 in LR equilibrium). > > Why (on the supply side) do they take i as given? To answer with a question: Why not? A theory > doesn't need to be about everything to add to our knowledge. We don't > need to know everything about everything to know a little something > about something. This MPT story is supposed to be about how the > profitability of capital invested in *means of production* is > determined. The theory says that, on the supply side, this > profitability has to be affected by the rent on wealth *ownership* in > general, i. And how this rent i is determined is not addressed > directly in this particular framework. Again, nothing wrong with > that. > Julio, so you agree that the rate of interest is *not* determined by marginal productivity theory. Which means that it is not determined by the marginal product of capital (even assuming the latter exists, which I doubt). But you say “nothing wrong with that”. Really? Marginal productivity theory is supposed to be a theory of distribution which explains the incomes of capitalists and workers. The rate of interest provides the income of capitalists, but it is not determined by marginal productivity theory?! And you think that is OK, that marginal productivity theory is still a good theory of distribution? I don’t think so. I think it is a failure to do what a theory of distribution is supposed to do and what it claims to do. It smuggles in the rate of interest as an exogenous given. > > Actually, if one can extract implications that are readily apparent, > then this actually highlights the true nature of capital, since the > story says that the profit extracted by the capitalists deploying > means of production in a given production process is nothing but a > particular form of rent extraction, a form of hijacking labor, on the > grounds of a monopoly of *ownership* over productive wealth. But marginal productivity theory does *not* explain the “profit extracted by capitalists deploying the means of production”. According to this theory, the capitalists deploying the means of production earn *zero*profit in the long-run. Producing firms pay the rate of interest to the rental firms from whom the producers rent their capital goods, and they pay wages to workers. In the long-run, the “price of capital” is equal to the sum of these two payments, so there is nothing left over for the producing capitalists! They hire labor and rent capital in order to produce goods without long-run compensation for themselves! This is a final absurdity of marginal productivity theory. > . > > >> > 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. > >> > > >> > >> 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) > >> > > I don’t understand this argument at all. What is required to be proved > is > > that the neoclassical MPK (aphysical characteristic of the production > > function) is equal to the Marxian [(MELT)(SNLT) – wages]. Where is the > MPK > > in these equations? Where is the MELT? > > MELT is an arbitrary constant, Fred. It depends on the (arbitrary) > choice of monetary unit. Truly irrelevant: Just let MELT=1. No loss > of generality. All I'm saying in these last equations is that, in the > MPT, profit is a function of SNLT. That is implied, of course. We > know that the neoclassicals do not use Marx's terminology or wield > Marx's conceptual understanding. > > You claim that, unlike in Marx, in the MPT story, profits don't go > down if wages go up. I showed you that under the MPT story profits > (as a share) also go down if wages (as a share) go up. But do they > go down dollar for dollar, as they do in Marx? Not necessarily, > because in Marx some of the moving parts (SNLT) are assumed as given, > while in the MPT story, SNLT (or the output in which it is "embodied," > which has a first-order effect on wages) is an endogenous variable. > The net output (and its value) is split into two portions under both > stories: the portion that goes to labor and the portion that goes to > capital. If you assume that the net output (and its value) is given, > then changes in the portion that goes to labor reduce 1-to-1 the > portion that goes to capital. But if the net output is allowed to > vary, then the 1-to-1 rule doesn't apply anymore, in general. > > However, and here's where the envelope theorem applies, under the > right assumptions, the second order effect (from the parameter, wages, > to the endogenous variable, output or netput) can be made to vanish > about the "optimal" value of the "parameter," and you can have the > same 1-to-1 rule as in Marx. So, there: I'm showing the formal > equivalence between the two approaches. > Julio, I think you are doing a lot of hand-waving and not connecting the dots, especially the quantitative dots. I don’t think you have explained how these equations demonstrate that the quantity of the neoclassical MPK is equal to the Marxian theory of profit. You have not explained what these equations mean and how they provide the proof that is needed. I will try to find some time to respond to your more general comments. Fred
_______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
