Which means Edinburgh is currently closer to the geographic north pole (defined as the place where the planet's axis of rotation intersects the surface) than London. If it moves, then this relation may no longer hold unless it is fixed by historical convention.
based on a third place- the geographic north pole.
We don't apprehend a fact. We gain information.
It is an intension which, because there is a conventionally defined geographic north pole, has a well defined extension over which there is a partial ordering such that some places are north of some other places.
This would be the case even if we were speaking of the Londistan and the Edinburgistan featured in a fantasy novel about fire breathing Islamic dragons.
It exists in the same way if there is a geographic north pole and a metric for distance from it.
No. It exists on earth where there is a geographic north pole in a particular location. There may be 'true polar wander' and it may be that at some remote time, what is north and what is south will change.
It is what I have said. The earth exists in time and space. Over a long enough period, continental drift may change the relative location of places on it.
If the 'extension' of the 'universal' (which is a name or an 'intension') is well defined then Liebniz's laws of identity apply. The thing is like other things.
I suppose this has a well defined extension for physicists. It may not do so for cultural discourse. I may say 'Rishi Sunak exemplifies whiteness in our culture. Donald Trump is a badass niggah.'
It is an intension. For some purposes it has a well-defined extension. For others, it does not. I may say 'Rishi Sunak reeks of whiteness. Trump is my homeboy. He got my back.'
Russell & Whitehead did not formalise the intensional logic implicit in 'Principles'. Alonzo Church further developed Ramsey's simple type theory but some difficulties remained.
The Wittgenstein of the Tractatus, was brimming with confidence that elementary propositions ('simples') which were their own truth functions existed and there was a 'general form of proposition which was a truth-function of elementary propositions, built up through successive applications of the negation operator. Ramsey, who translated the Tractatus, pointed out that a proposition Wittgenstein thought was true- viz. '“point in the visual field cannot be both red and blue'- depended on some truth about points or colours. It did not arise from the general form of the proposition which, Wittgenstein, had hoped would determine all and only genuine propositions. Wittgenstein chose to give up the claim that there were necessary and sufficient conditions to distinguish meaningless or senseless propositions. However other mathematical logicians were prepared to carry forward that program to which the development of the computer owes so much.
Gramsci, it must be said, was not a mathematician or a logician but was a student of literature, linguistics and the philosophy of Croce. Sraffa was close to Gramsci and personally ensured that his fine mind was supplied with all the latest books.
Amartya Sen, in discussing the influence of Gramsci, via Sraffa, on Wittgenstein- ignoring the 'Ramsey effect' on the last two, quotes the following passage from the Prison Notebooks-
Russell says nothing of the sort. We can think of Londistand and Edinburgistan as described in a fantasy novel.
there is a magnetic north pole though, apparently, it is now fleeing Canada so as to settle in Siberia.
Only in the sense that every place is both East of some particular place while being West of some different place.
Nonsense! The Chinese invented the compass or 'south pointer' and it spread to the Indians and the Arabs and the Europeans. The European cultured class didn't matter. Mariners did. They weren't cultured at all. They were drunken boors like Captain Jack Sparrow in 'Pirates of the Caribbean'.
Apparently, the Malay mariners used the term 'Bharat' (meaning India) for 'West'. It really isn't 'cultural imperialism' or 'appropriation' to use terms coined by some other civilization. Whining about the hegemony of White dicks (did you know Newton had a white dick? That's why he invented Gravity to prevent us darkies from flying away to Uranus) is no way for grown-ups to pass their time- even if they are Professors of shite subjects.
Not really. Both Sraffa and Gramsci failed. Marxism is stoooopid. Frank Ramsey was the one smart guy at Cambridge back then. But he died young. Had he lived he might have put a stop to the anal-tickle availability cascade of intensional fallacies. But then, he might also have put Keynesian economics on a sound footing and forestalled the foolishness of Arrow-Debreu.
Because 'elementary' or 'atomic' propositions are far to seek. Maybe, after mankind has attained omniscience, there will be such things. But till that time, we are stuck with 'epistemic' intentions which change as our knowledge changes. This meant that logicism was either something useful in limited contexts or else just the 'masked man fallacy' from the Fourth Century BC.
Sraffa's economic equivalent of Wittgenstein's 'simples', is the idea of a 'basic' good. Non-basic goods are 'luxuries' and Sraffa says they can be ignored even if they exist provided we assume that, by magic, the past remains the same as the present. This is because a deficit economy would not exist and a surplus economy would not be able to invest the surplus to raise growth. That's why only 'basic' goods determine everything. The problem is that, just as there are no 'simples', so too, there are no 'basic goods'. Everything can be a luxury- e.g. feeding wheat to parrots (Bohm-Bawerk's example). Sraffa wants a 'standard' commodity (numeraire) and so tells the luxuriantly plumed parrots to fly away so he can compose the standard commodity only out of 'basic goods'. But this is like the dream of getting rid of language and replacing it with propositions containing only 'simples'. The pay off is that we can get rid of Time and 'mechanical causality'. At this point, we no longer need to bother with language or knowledge or surviving. We have gone beyond Time and Causality and the duality of subject and object. In other words, we have become perfectly stupid and perfectly useless.
It was bigoted shite. Capitalists are hegemonic and using mind control to keep the proles in bondage. It isn't the case that factory workers don't want to run factories because they know that their fellow workers will steal everything in sight.
I suppose one could say that Sraffa and Witless were equally useless because the things they thought mattered-'Capital' in the former case and 'following rules' in the latter- were 'intensions' without unique or well defined extensions. They may as well have made miaow miaow or woof woof noises. They weren't expressing anything at all.
No. It is defined as physical capital- i.e. stuff used to make goods. There is a 'derived demand' for it.
It can be defined as an inventory of capital goods. But their money value (net present value) changes with the interest rate- if that is the rate of discount applied. But it might not be. There are ways to ensure that the long term discount rate is unaffected by short term changes. Here expectations regarding 'marginal efficiency of capital' play a role.
Which one? There are several. In theory, arbitrage should bring them all into line but, equally, sophisticated instruments exist so as to 'lock-in' to a particular interest rate which is deemed equal to m.e.K for a particular project. Here the capital value may change to compensate for differences in risk and cost of funds.
No. Accountants keep track of 'historic costs' and thus rank capital intensity. What Sen means is that when interest rates, exchange rates, m.e.K and real per unit labour costs change, then for new projects then capital intensity is viewed differently. Consider the dramatic fall in the price of computing. What was highly capital intensive- because it required a mainframe- is not as cheap as chips and thus labour intensive. On the other hand, some things which were labour intensive- e.g. Indian software development- may become capital intensive if the work is done by generative AI running on 100 billion dollar quantum super-computers.
It is nonsense. We know that all models are underdetermined and hence lack categoricity. Still, at the margin, some are useful enough. Sraffa's wasn't useful. It was a picture of an economy without 'mechanical causation' or the lapse of time. He wrote-
Sraffa is assuming that marginal product means 'output from employment of an additional unit of the factor'. But it doesn't mean that. It means 'output from the last unit employed'. That can be found easily enough (otherwise no historical accountancy costs are discernible and hence Sraffa's system has no associated mathematical matrix) . Moreover, since the economy is in a steady-state, it remains unchanged for all time. But the force that sustains it is magic.
We can
ask: what difference does it make?
Sraffa assumed a uniform rate of profit which meant his model was observationally equivalent to a constant returns model with 'aggregative capital'. So, the thing made no difference at all. It was just that Sraffa was lying about the assumption of constant returns. But, as Paul Samuelson pointed out, it was baked into the Math.
Aggregative neoclassical models with capital
as a factor of production are irreparably
damaged.
Both mathematical growth and capital theory turned out to be useless. But so did Arrow-Debreu general equilibrium which turned out to be 'anything goes'.
But neoclassical economic theory
need not be expounded in an aggregative
form. It is possible to see production in
terms of distinct capital goods and leave it at
that.
Leave it to Accountants. They have been doing this stuff for hundreds of years.
Also, the kind of practical insight for
policy that one may try to get from arguing in
aggregative terms (such as the case for using
less capital-intensive techniques when labor
is cheap and the cost of capital is high) is neither dependent on how interest rates are
actually determined, nor conditional on any
very specific model of capital valuation.
What determines 'policy advise' is who pays for it. If the guy who wants to sell capital goods pays you, your project appraisal is positive. If nobody is paying you, gas on about how 'Small is Beautiful' and poor peeps desperately need jobs spinning cotton or constructing super-computers out of cow-dung.
Yet, at the level of pure theory, the idea
that interest is the reward of the productivity of capital
there is no such theory. Interest is the reward for foregoing present consumption. The marginal product of capital is the incentive for borrowing or using your own funds for investment.
rather than, say, the result of
exploiting labor
and raping trillions of disabled lesbians with your invisible cock
(or simply the passive
residual that is left over between the output
value and input costs, including wage payments
that is profit, not interest.
) can play—and has often been made
to play—quite a major part in political and social debates
between nutters
about the nature of the capitalist system.
not to mention the nature of Whiteness or the fact that dicks cause rape. Ban them immediately!
Thus, the political and social
context of Sraffa’s demolitional critique of
capital as a factor of production
which was achieved by constraining the future to be the same as the past.
is not hard
to see once the subject matter of the critique is fully seized and interpreted in line
with a classical debate stretching over several centuries.
Sraffa was saying 'boo to Capitalism! It is raping trillions of disabled lesbians with its invisible cock!' But Italy and the UK were doing well under free- or freeish- enterprise. Nobody wanted 'Worker's Control' or the politics of envy- i.e. raising taxes till all the talented people ran the fuck away.
Sraffa’s findings have to be
seen as a response to a particular descriptive account—with normative relevance—
of the capitalist system of production, and
that is where the potential social relevance
of these technical results lies.
Sraffa found Capitalist England a safer refuge than some shithole behind the Iron Curtain. He may have bit the hand that fed him but those were love-bites merely.
I must confess that I find it altogether
difficult to be convinced that one’s skepticism of unrestrained capitalism must turn
on such matters as the usefulness of aggregate capital as a factor of production
in which case, Sen thinks Marx was barking mad and, moreover, barking up a non-existent tree.
and
the productivity attributed to it, rather than
on the mean streets and strained lives that
capitalism can generate,
It can generate the resources to fund collective insurance. That's what the Welfare State is- an insurance scheme. Workers pay into it and gain benefits from it when unable to work.
unless it is
restrained and supplemented by other—
often nonmarket—institutions.
Insurance is a market institution. True the Government can take over the down-side but it can also go off a fiscal cliff. Entitlements may be rationed or undergo a haircut. The difference between the Government and a private company is that the Government has sovereign immunity. Madoff can be sent to jail. The Chancellor of the Exchequer is not liable to imprisonment for fraud if he reneges on welfare commitments.
And yet it
is not hard to see the broad social and
political vision of Sraffa’s analysis and its
argumentative relevance for debates
about taking the productivity of capital as
explication of profits.
It is very hard to see how debates about Capitalism were relevant when History vindicated it while shitting copiously on Communism.
Prices and Two Senses of Determination
I turn now to a second example. Sraffa
considers an economy in equilibrium to the
extent of having a uniform profit (or interest)
rate.
In other words, he considers an incompossible fairy tale world.
He shows that if we take a snapshot of
the economy with a comprehensive description of all production activities, with
observed inputs and outputs, and a given
interest rate, from this information alone we
can determine (in the sense of figuring out)
the prices of all the commodities as well as
distribution of income between wages and
interest (or profit).
In other words, he shows that if he thinks he has rigged a game in advance, then he thinks the game is rigged in advance. Sadly, no humans would play that rigged game.
And, if we consider a
higher and higher interest—or profit—rate then the wage rate will be consistently lower
and lower.
But, assuming workers have higher propensity to consume, this means aggregate demand falls with the result that prices fall and thus profits fall. Interest payments may remain the same but some enterprises go bankrupt. This is a recession. There may be a small 'real balance' wealth effect but it will be cancelled out by bankruptcies and the fall in asset prices.
We can, thus, get a downward sloping wage-profit relationship (an almost
tranquil portrayal of a stationary “class war”),
for that given production situation, and the
specification of either the interest (or profit)
rate or the wage rate will allow us to calculate all the commodity prices.
The dog that does not bark at all in this
exercise is the demand side:
In other words, senile Sraffa was writing nonsense.
we go directly
from production information to prices.
Sen is drawing a conclusion previously arrived at by Arun Bose in 1964. Sraffa rejected it, writing to him- ' I am sorry to have kept your MS so long—and with so little result.
The fact is that your opening sentence is for me an obstacle which I
am unable to get over. You write: “It is a basic proposition of the Sraffa
theory that prices are determined exclusively by the physical requirements of
production and the social wage-profit division with consumers demand
playing a purely passive role.”
Never have I said this: certainly not in the two places to which you
refer in your note. Nothing, in my view, could be more suicidal than to
make such a statement. You are asking me to put my head on the block so
that the first fool who comes along can cut it off neatly.
Whatever you do, please do not represent me as saying such a thing.' The problem here is that saying 'Sraffa gets rid of Time and Causality so as to rely wholly upon Magic so as to do a bit of Marxian Econ' makes Boses and Sens and Chatterjees and Mukherjees look as stupid as their hero.
There is no need, in this mathematical exercise, to invoke the demand conditions for the
different commodities, which are, for this
particular analytical exercise, redundant.
Just have Soviet style rationing and forget about prices.
In
interpreting this very neat result, the philosophical foundation of meaning and communication comes fully into its own.
No. What becomes obvious is that Sraffa is committing the intensional fallacy. He thinks demand is independent rather than impredicatively related to prices and wages. In other words, he just got rid of the Slutsky substitution and income effects.
It is
extremely important to understand what is
meant by “determination” in the mathematical context
it is finding a unique value or solution.
(or, to put it in the “anthropological way,” how it would be understood in a
mathematical community), and we must not
confound the different senses in which the
term could be used.
Just as there are no unique rules for 'language games', there is no unique solution to any type of general equilibrium model because of impredicativity and epistemic intensions- i.e. expectations or preferences.
There has been a strong
temptation on the part of the critics of mainstream economic theory to take Sraffa’s “critique” as showing the redundancy of
demand conditions in the causal determination of prices, thereby undermining that
theory since it makes so much of demands
and utilities.
Professors of shit subjects think they know what everybody should have in their shopping basket. It is vitally important, in a truly democratic country that people's liberties and capabilities are protected such that they don't end up buying tasty things to eat or nice clothes to wear.
Robinson (1961) is not the only
commentator to display some fascination
towards taking that route (p. 57):
…when we are provided with a set of technical
equations for production and a real wage rate
which is uniform throughout the economy, there
is no room for demand equations in the determination of equilibrium prices.
Because the 'real wage rate' is the money wage (which is known) deflated by a weighted price vector which is not known. That price vector captures the demand side. The problem is that nobody knows the 'real wage rate' at any given moment. Only after a time lag will different deflators be available to show how real wages in different industries have changed. Even then there will be Laspeyres or Paasche type bias. In the former case, there may be a negative income effect. In the latter case it may be positive because people are switching to goods embedding more recent technology.
However, since the entire calculation is
done for a given and observed picture of
production (with inputs and outputs all
fixed, as in a snapshot of production operations in the economy), the question as to
what would happen if demand conditions
change—which could of course lead to different amounts of production—is not at
all addressed in this exercise.
In other words, it is stupid shit. The fact is, in the Soviet Union, there was 'repressed inflation'- i.e. longer queues instead of higher prices. But there was also a lot of waste. Some goods were too cheap and thus bought and used for some other purpose. One way round this would be to use 'shadow prices' to reflect scarcity. But the informational requirements for computing this for the whole economy was too high.
The tendency to interpret mathematical determination as causal determination can, thus,
cause a major misunderstanding.
There was no such tendency. During the Sixties all sorts of mathematical models were found to lack unique solutions. They were 'anything goes'. Indeed, 'naturality' (non-arbitrariness) turned out to be far to seek. Then came problems of concurrency, complexity and computability. Deterministic systems might have unique solutions but in a time class exponential to the life of the Universe.
The question was why Marxism didn't just curl up and die once it was known that it either had no mathematical representation or if it did (e.g. Koopmans/Kantorovich) the thing was intractable and so for a Hayekian reason, markets must prevail or else a wasteful type of sclerosis would grip the economy. The answer was it suffered brain-death but remained spry enough on select Campuses. It was merely a branch of Grievance Studies on a par with that of Disabled Lesbians of Colour who were being oppressed by invisible white dicks. Sadly, the Queer Crips were even more vocal before being supplanted by militant transgender activists who consider TERFs the source of all evil.
In a footnote, Sen quotes Sraffa who described his little book as dealing with an
extremely elementary problem; so elementary indeed that its solution is generally taken for granted. The problem is that of ascertaining the conditions of equilibrium of a system of prices & the rate of profits, independently of the study of the forces which may bring about such a state of equilibrium.
The condition for price equilibrium is simple. Markets clear. Everybody can buy or sell as much as they want at the going price. There is no equilibrium condition for 'the rate of profit' which is a matter of historical accounting. One may speak of a notional 'marginal rate of profit' which is equated to a notional equilibrium interest rate. But that notion is epistemic and has to do with expectations. You commit the intensional fallacy if you equate it to something in the world rather than in the head.
Value and Descriptive Importance
If Sraffa’s results do not have anything
much to say on causal determination, then
what gives them interest?
I suppose Sraffa was useful in pushing back against the stupidity of mathematical capital or growth theory. Perhaps, he was opening a door to a purely gesture political Marxism unconcerned with what causes things so as to focus exclusively on 'the Cause'.
That question
can be answered by considering the nature
of social communication to which Sraffa’s
work contributes. First, analytical determination—not only causal determination—is
a subject that interests people a good deal.
Causal determination enables one to change outcomes. That is interesting. If analytical determinations enable us to make better predictions, that too would be interesting. Otherwise, they are just a schizophrenic word-salad or species of paranoia.
Sraffa’s demonstration that a snapshot picture of just the production conditions of the
economy can tell us so much about possible
prices is not only a remarkable analytical
diagnosis,
It was nonsense. Production conditions in the British economy are such that wankers produce a lot of jizz. This suggests that the price of jizz must be high enough for so much of it to be forthcoming.
it is also a finding of considerable
intellectual interest to people who want to
think about the correspondence between
quantities produced and prices charged.
There is no such correspondence. My farts are a free good. I invite people to smell my farts but they refuse on the grounds that they have plenty of their own farts to smell.
Gramsci has argued that everyone is a philosopher
Stalin was. Oddly, his philosophy of language was actually quite helpful at a time when some on the Left demanded that traditional forms of poetry in vernacular languages be banned. Stalin said language is independent of the 'sub-structure'. You are welcome to use feudal or bougie language or literary forms. You don't have to be a rabid Proletkult hooligan.
at some level, and perhaps an
exactly similar thing can be said about the
fact that analytical—and even mathematical—curiosity is widespread, and influences our social thinking.
Mimetics, not mathematics, influences our social being.
The idea that it is
possible to find out what the commodity
prices are merely by looking at the given
“production side” (inputs and outputs), along with the interest rate, is a powerful
analytical result.
Sen doesn't understand that the price vector is the deflator for the real wage which is assumed to be known. That vector captures the demand side.
A second reason for being interested in
Sraffa’s results is to understand them in
terms of the idea of value and the political
content of that concept.
It was Marxian or Georgist garbage. True value is created by disabled Lesbians of Colour. Sadly, they are sodomized by invisible White cocks and thus surplus value is confiscated by Jewish Bankers.
In classical thought, “value” has been seen not merely as a way of
getting at prices (Smith, Ricardo, and Marx
all discussed problems in going from values
to prices), but also at making a descriptive
statement of some social importance.
Value is only created by disabled Lesbians of colour. If you deny this elementary truth you are a Nazi and should very kindly top yourself.
To
many economists the idea of “value” appears
to be thoroughly wrongheaded. For example, Robinson invoked positivist methodology (she could be described as a “left-wing
Popperian”) to dismiss any real relevance of
the idea of value in general and its invoking
in Marxian economics in particular. In her
Economic Philosophy, Robinson (1964) put
her denunciation thus (p. 39):
On this plane the whole argument appears to be
metaphysical; it provides a typical example of
the way metaphysical ideas operate. Logically it
is a mere rigmarole of words, but for Marx it was a flood of illumination and for latter-day
Marxists, a source of inspiration.16
“Value will not help,” Robinson concluded. “It has no operational content. It is just
a word.”
Robinson was wrong. During the War, people realized that some things had 'survival value'. Other things didn't. What is or isn't valuable depends on whether or not there is an existential threat. Still, some costly things might be bad in their effects or repugnant in themselves and so Society may forbid their production or consumption.
The philosophical issues raised by
Gramsci and Sraffa, and of course by
Wittgenstein, have considerable bearing on
this question.
No. Workers don't want 'Workers Control'. They just want to get paid. Gramsci was wrong though, at certain times and certain places, it could be argued that workers would do a better job running enterprises than lazy hereditary proprietors. As a matter of fact, worker participation in management can raise productivity, quality control, etc.
Sraffa was a good descriptive economist and had he remained in Italy, his books and articles would have been widely consulted. Sadly, he had to relocate to lean unlovely England. Wittgenstein, on the other hand, was as stupid as shit. Perhaps he'd have done well as an engineer.
Just as positivist methodology pronounces some statements meaningless when they do not fit the narrow sense of “meaning” in the limited terms of verification or falsification, the Tractatus
too saw little of content in statements that
did not represent or mirror a state of affairs
in the same logical form.
Witless was optimistic that conceptual (he would say 'logical') truths were discoverable and empirically verifiable. But, if so, where were they? There had been empirical verification of Einstein's theory. Why had nothing similar happened for Russell & Wittgenstein's own project?
This has the
implication, as Simon Blackburn (1994) put
it, of denying “factual or cognitive meaning
to sentences whose function does not fit
into its conception of representation, such
as those concerned with ethics, or meaning, or the self” (p. 401).
If we had access to all the facts about the world, we might deny that anything else was meaningful. But it seems less and likely that we could ever be in that position. Still, for Economics, Sraffa stopped being meaningful (though, one understood, he didn't like Capitalism probably because it got drunk and went down on Mussolini) and, for Mathematical Logic, Witless stopped being meaningful. Still, if you were stupid, you could do your PhD on one or the other or both of those losers.
In contrast, the
philosophical approach pursued by the
“later Wittgenstein,” partly influenced by
Sraffa himself, sees meaning in much
broader terms.
This could be useful for Grievance Studies mavens craving affirmative action.
The interpretation of value and its
descriptive relevance have been well discussed by Maurice Dobb (1937, 1973), the
Marxist economist, who
recruited for the KGB
was a close friend of
Sraffa and his long-term collaborator in editing David Ricardo’s collected works. Dobb
pointed to the social and political interest in
a significant description of economic relations between people.
There is greater significance in describing the sexual relations between people. It may be that a proper audit will reveal that the Brits benefitted India economically. However, what we must remember is that evil Viceroys used to surreptitiously enter the hovels of trillions of starving Indians and mercilessly drain them of their vital bodily essence through aggravated acts of fellatio and cunnilingus. King Charles should apologize for this disgusting vice of his Grandfather's Viceroys. He should offer us suitable reparations. I'll settle for a case or two of Champers every week. Also a hamper from Fortnum & Mason's.
Even such notions as “exploitation” which have appeared to some
(including Robinson) as “metaphysical,” can
be seen to be an attempt to reflect, in communicative language, a common public concern about social asymmetries in economic
relations.
Fuck economic relations. You can't exploit people with very low productivity. You can drain them of trillions of gallons of jizz.
As Dobb (1973) put it (p. 45):exploitation” is neither something metaphysical nor simply an “ethical” judgement (still less “just a noise”) as has sometimes been depicted: it is a
factual description of a socio-economic relationship, as much as is Marc Bloch’s apt characterisation of Feudalism as a system where feudal
lords “lived on labor of other men.”
Feudal lords killed other feudal lords or wannabe feudal lords. Their military prowess was directly linked to their remuneration.
Sraffa’s analysis of production relations
and the coherence between costs and prices (within a snapshot picture of the economy),
while different from a labor-based description in the Marxian mould, is also an
attempt to express social relations with a
focus on the production side, rather than on
utility and mental conditions.
If so, he would have a theory of the entrepreneur, the arbitrageur (market maker), and the managerial class. Under cartelized 'administered pricing', a snapshot of the supply side did give you information about the demand side on the assumption that tastes are slow to change. But Sraffa was not engaged in this type of Galbraithian analysis.
We can
debate how profound that perspective is,
but it is important to see that the subject
matter of Sraffa’s analysis is enlightening
description of prices and income distribution, invoking only the interrelations on the
production side.
If so, Iyerian analysis would be even more enlightening because it would focus only on farting and jizzing. Assuming that both activities are discouraged while engaged in the production process, we would have a snapshot of who actually has a job (because their output of farts and jizz would fall while at work). Assuming real wages are known, then the price vector is known. Moreover, by adding up consumption bundles we get to total Consumption. We can work out Investment from the Capital Output ratio and standard rate of depreciation. Anything else we need, we can assume to exist. Thus, we can also compute the total number of invisible flying unicorns which feed on my farts.
Closely related to this perspective, there is
a further issue which involves addressing the
classical dichotomy between “use-value” and
“exchange-value,” as it was formulated by
the founders of modern economics, in particular Adam Smith and David Ricardo.
This is the difference between the benefit you get by keeping something rather than selling it on Ebay. It is of interest to Marxist nutters because they claim that the boss class beats and sodomizes proles while forcing them to work in factories. Some claim that workers get a 'wage'. This is absurd. Closely examine any prole and you will see he is dripping cum from every orifice. Ask him if he gets paid and he will laugh bitterly.
Sraffa and Dobb, who collaborated in the
editing of Ricardo’s collected works, had significant interest in this question, and to
that issue, I now turn.
Neither Sraffa nor Dobb were benders and thus Cambridge was wasted on them. Sen does not say as much, but their 'collaboration' on Ricardo did not involve butt sex. This proves they were homophobic Nazis. Also they had dicks. White dicks! We must decolonize and depatriarchalize Ricardo- a leading Lesbian of Colour who was noted for her vigorous fisting of Queen Adelaide.
Use, Exchange and Counterfactuals
David Ricardo’s foundational book, On the
Principles of Political Economy and
Taxation, published in 1817, begins with the
following opening passage: It has been observed by Adam Smith, that “the
word Value has two different meanings, and
sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that
object conveys.
Just speak of price and be done with the matter.
The one may be called value in
use; the other value in exchange. “The things,”
he continues, “which have the greatest value in
use, have frequently little or no value in
exchange; and on the contrary, those which have
the greatest value in exchange, have little or no
value in use.”
Some things are 'free goods' because the supply equals or exceeds demand. That is why their price is zero.
Water and air are abundantly useful; they are indeed indispensable to existence,
yet, under ordinary circumstances, nothing can
be obtained in exchange for them.
Shitting is vital to existence. Why don't we get paid for our shit?
Gold, on the
contrary, though of little use compared with air or water, will exchange for a great quantity of
other goods
It is scarce. Smith and Ricardo supported a 'Labour theory of value' because they thought of the Aristocrat and the Clergyman as a parasite.
There is a puzzle here that is of some
interest of its own,
No. This is stupid shit.
and can also tell us
something about how we may think about
prices and values in general. There are two
alternative ways of perspicuously explaining how gold can come to command a
higher price than water,
the first is to piss on the person saying 'if you value water so highly, you will be fucking delighted to receive copious quantities of my urine'. The second is to say 'gold is less valuable that water. In returning for pissing on you, I'm going to take your gold wedding ring. This doesn't make us even. Still, I'm in a generous mood today.'
despite being so
much less important for human life. One
answer, based on the utility side of the picture, is that given the large amount of
water that is generally available and the
shortage of gold, the so-called “marginal
utility” of water (the incremental benefit
that a consumer gets from an additional
unit of water) is small, compared with the
marginal utility of gold. The other answer is
that the cost of production—or of mining—of gold is much higher than that of
water, in the situation in which we examine
the economy. Neither explanation is an attempt at causally explaining why and how the prices and
quantities that exist have actually emerged.
They are, rather, answers to the Smith Ricardo question: How can people understand why gold “though of little use
compared with air or water” exchanges “for a
great quantity of other goods”?
No. This is stupid shit you have teach kids in the first week of their Econ 101 course. It prepares them for the stupidity and uselessness of the rest of the course.
The cost based explanation and the utility-based explanation are, thus, alternative ways of
explicating what we observe, by invoking
ideas like costs of production and marginal
usefulness, which can serve as means of social
communication and public comprehension.
Fuck public comprehension. This is shite teechurs get paid a little money to teach. You must make students understand that Econ is boring and stupid. Chances are you will end up doing a boring and stupid job. Get used to it.
While Sraffa himself did not publish
much that relates directly to this interpretational question (except to comment on a
distinction involving the use of “counterfactual” concepts, on which more presently), we can get some insight into the issues
involved from the writings of Maurice
Dobb, Sraffa’s friend, collaborator and
exponent.
Dobb understood that the Mummies and Daddies of his students had spent a lot of money on their education. His idea was that should revenge themselves on their parents by working for the KGB in between having lots of butt sex.
Indeed, in a classic paper on
“the requirements of a theory of value,”
included in his book, Political Economy
and Capitalism, Dobb (1937) had argued
that a theory of value must not be seen only as a mechanical device that has merely instrumental use in price theory.
There is no need for any such theory. Just look at how much people will pay for a good or service. This is called 'market research'. Then find out how much it would cost to supply the item. This is called 'cost and management accountancy' and is deeply boring.
Even as
theories of value address the “Smith- Ricardo question” regarding a coherent
understanding of the dual structure of
value in use and value in exchange, they
attempt to make important social statements of their own on the nature of the
economic world by focusing respectively
on such matters as the incremental usefulness of commodities, the satisfaction they
can generate, the labor that is used in making them, or the costs that have to be
incurred in their production.
But, theories of value are useless. You have to teach them at the beginning of Econ 101 so as to lower the expectations of pupils who might think you will help them get rich by buying and selling traded options. Remind them that they were too stupid to study Medicine and not good looking enough to become social influencers. You are going to have a boring life. Get used to being bored out of your gourd.
The inclination of classical political
economy, including classical Marxian economics, to expect from a theory of value
something much more than a purely
mechanical “intermediate product” in
price theory is, of course, well-known.
Did you know that the boss class pays you less money than they make by selling what you produce? You did? Oh. Well, don't you think 'profit' is a form of anal rape? You don't? What if I tell you I can get billions of dollars in damages for you if you claim that the Boss's invisible cock has fucked you in the ass umpteen times? Will that change your mind? Sadly, people tend to want to be paid upfront before going on 'Only Fans' with video footage of their being sodomized by Top Hatted Capitalists.
Indeed, this inclination is often taken to be
special pleading, for largely political reasons, in a contrived justification of the relevance of labor theory of value. However,
this diagnosis does the classical perspective
less than justice, since the importance of
perspicacious explanation and communication is part and parcel of the classical
approach.
It is wholly unnecessary. Peeps may want to study Econ to get rich. But Economists want to bore the fuck out of them. Let them drop out of Collidge and go get rich somewhere less boring.
Indeed, it is important to recollect, in this context, the significance that
has typically been attached, in the perspectives of classical political economy and
Marxian economics, not just to labor and
production, but also to the idea of “use
value” (and to its successor concept in the
form of satisfaction—or “utility”—that
commodities may generate).
The problem here is that if labour supply becomes elastic (because of high general purpose productivity) then there can be no Marxian exploitation. Thus raising general purpose productivity is a policy prescription everyone can get behind. The next step is to get rid of 'ideas of justice' or politics which lower total factor productivity or which increase 'regime uncertainty'. But this just means defunding shite Social Science.
The comparison between the two rival value theories in
the form of labor theory and utility theory
was taken to be of interest precisely
because both made socially engaging statements;
anyone can make those. What is intolerable about our society is that invisible white dicks, belonging to Merchant Bankers, are raping everybody including the Environment.
there is no attempt here to deny the
nature of social interest in utility theory as
a theory of value.
nor any attempt to deny the nature of social interest in anti-Semitic theory based on the fact that the majority of invisible cocks are circumcised.
Indeed, in 1929, in a prescient early critique of what would later develop into the
“revealed preference” approach (led by Samuelson 1938), Dobb (1929) regretted
the tendency of modern economics to downplay the psychological aspects of utility in
favor of just choice behavior (p. 32):
Actually the whole tendency of modern theory is
to abandon … psychological conceptions: to
make utility and disutility coincident with
observed offers on the market; to abandon a
“theory of value” in pursuit of a “theory of
price.” But that is to surrender, not to solve the
problem.
Just as refusing to address the problem posed by invisible white cocks is to surrender, not to solve, the underlying problem. Obviously, this involves joining the KGB or Hamas or whatever.
Indeed, “the problem” to which Dobb
refers, and to which utility theory of value,
like the labor theory, caters, is to make “an
important qualitative statement about the
nature of the economic problem” (Dobb
1937, pp. 21–22).
Rich peeps cause poverty by sneaking into the hovels of the poor to steal all their cool, shiny, stuff.
Dobb went on to distinguish between these two social explanations
by noting that “the qualitative statement
[utility theory] made was of a quite different
order, being concerned not with the relations of production, but with the relation
of commodities to the psychology of consumers” .
He was wrong. Utility was just the 'objective function' to be maximized. Suppose the aim is to kill the enemy. Then you assign higher utility to weapons which kill lots of them.
In contrast, the picture of
the economy presented by Sraffa concentrates precisely on “the relations of production,”
No. He has no theory of entrepreneurship, the managerial class, market-making arbitrageurs etc.
and in explicating Sraffa’s
contributions, Dobb (1973) pursues exactly
this contrast.
There is much evidence that this contrast
was of particular interest to Sraffa himself.
But in this comparison, Sraffa saw another
big difference which was methodologically
important for him (though I know of little
evidence that it interested Dobb much),
given Sraffa’s philosophical suspicion of the
invoking of “counterfactual” magnitudes in
factual descriptions.
I suppose Sraffa knew of Ramsey's test for counter-factual conditionals- viz. to assess "If A, then B," you hypothetically add the antecedent (A) to your current knowledge and see if the consequent (B) follows, making minimal adjustments to maintain consistency. Might not entertaining such hypothesis be the thin edge of the wedge by which you become subjected to 'hegemony' or 'false consciousness'?
Sraffa noted that in opting for a cost-based explanation (in line
with Sraffa 1960), we can rely entirely on
“observed” facts, such as inputs and outputs
and a given interest rate, without having to
invoke any “counterfactuals” (that is, without having to presume what would have
happened had things been different).
So, Sraffa gets rid of opportunity cost. Sadly, he could not get rid of the asset-stripper who notices that the book value of a company is much less than its market cap and thus a profit can be made by buying the company and selling off its assets. Economics without opportunity cost is Hamlet without the Prince of Denmark.
This
is not the case with the utility-based explanation, since “marginal utility” inescapably
involves counterfactual reasoning, since it
reflects how much extra utility one would
have if one had one more unit of the
commodity.
No. It is the increment in utility from the last unit consumed. This is equated to price.
The philosophical status of counterfactuals has been the subject of considerable
debating in epistemology.
Rational Expectations aren't counter-factual- they are the prediction of the correct economic theory on the basis of all available information. However, 'what if' considerations lie at the heart of economic activity because of Knightian uncertainty- i.e. the fact that all possible states of the world are not known. This militates for prudential, regret-minimizing, behaviour. But this includes things like FOMO- fear of missing out- and jumping on speculative bandwagons but not perhaps with both feet.
I see little merit
in trying to exclude counterfactuals in trying
to understand the world. But I do know—from extensive conversations with Sraffa—that he did find that the use of
counterfactuals involved difficulties that
purely observational propositions did not.
Knightian uncertainty involved the difficulty of dumping utility maximization in favour of regret minimization but this was not realised at the time. Arrow-Debreu were happy campers.
It
is not that he never used counterfactual
concepts (life would have been unbearable
with such abstinence) but he did think there
was a big methodological divide here.
Whether or not one agrees with Sraffa’s
judgement on the unreliability of counterfactuals, it is indeed remarkable that there is
such a methodological contrast between the
utility-based and cost-based stories (in the
Sraffian form).
There is the common sense view- viz. that entrepreneurs and arbitrageurs and a managerial class are involved in production and that they need to keep a sharp eye on market cap versus book value- and there is the crazy Marxist academic's view which is that all the non-Marxist economists are evil bastards. On the other hand, Sraffa had made a lot of money buying Japanese bonds when most people assumed they were worthless.
The difference between
them lies not merely in the fact that the former focuses on mental conditions in the
form of utility
but those mental conditions depend on material things- e.g. how tasty this pizza is.
while the latter concentrates
on material conditions of production
which depend on the mental conditions- in particular the expectations- of the entrepreneurs and managers and bankers and so forth.
(a contrast that is easily seen and has been much
discussed), but also in the less-recognized
distinction that the former has to invoke
counterfactuals, whereas the latter—in the
Sraffian formulation—has no such need.
Only because Sraffa wasn't concerned with actual production.
Concluding Remarks
The critical role of Piero Sraffa in contributing to profound directional changes in
contemporary philosophy, through helping
to persuade Wittgenstein to move from the
Tractatus to the theory that later found
expression in Philosophical Investigations, is
plentifully acknowledged by Wittgenstein
himself (as well as by his biographers).
But Witless was a cul de sac. Like Russell, he hadn't kept up with developments in his field- Godel, Gentzen, Tarski, Turing, Church etc.. In any case, Game theory was important. It explained 'conventions' as Schelling focal solutions to coordination (or discoordination) games. By contrast, 'language games' were useless.
What
may, however, appear puzzling is the fact
that Sraffa remained rather unexcited about
the momentous nature of this influence and
the novelty of the ideas underlying it.
Culturally, Italy was ahead of the UK. Pareto was a greater intellectual than Marshall. England was wealthy but Philistine. The Viennese were dilettantes. One final point, Sraffa and Witless had fought on opposite sides during the Great War. Was the latter really bright or had he been promoted by Milord Russell who had lost his taste for mathematical logic?
However, the sharpness of the puzzle is, to a
great extent, lessened by the recognition
that these issues had been a part of the standard discussions in the intellectual circle in
Italy to which Sraffa belonged, which also
included Gramsci.
As a result, the weakness of Wittgenstein’s
view of meaning and language in Tractatus
would have come as no surprise to Sraffa,
nor the need to invoke considerations that
later came to be known as “the anthropological way” of understanding meaning and the
use of language.
The similarity was that both wanted an 'objectivist' or even 'physicalist' credo. Sraffa could be considered a proponent of 'fix-price' economics (where prices stay the same and quantity consumed rises or falls) which captured aspects of cartelized manufacturing industry in the inter-war years.
There appears to be an evident “Gramsci connection” in the shift from
the early Wittgenstein to the later
Wittgenstein, though much more research
would be needed to separate out, if that is
possible at all, the respective contributions
of Sraffa and Gramsci to the ideas that
emerged in their common intellectual circle.
Gramsci was a heroic, Garibaldi-like, figure. Incarceration meant he had to substitute intellectual for revolutionary activity. I suppose the influence of Ramsey- and perhaps the experience of hearing Brouwer lecture- caused Witless to repent off his dogmatism in the Tractatus.
Turning to Sraffa’s economic contributions, they cannot, in general, be divorced
from his philosophical understanding.
I suppose, au fond, he had an 'externalist' theory of value. I sympathize. If only scientists could catch at least one of those invisible flying unicorns which feed on my farts, then mathematical economists will be able to conclusively prove that I produce 88 percent of the World's GDP.
After his early writings on the theory of the
firm (and his demonstration of the need to
consider competition in “imperfect” or “monopolistic” circumstances), his later
work did not take the form of finding different answers to the standard questions in
mainstream economics, but that of altering—and in some ways broadening—the
nature of the inquiries in which mainstream economics was engaged.
Sraffa saw that, at Cambridge, he could influence a lot of young people who were bound to gain power and influence in their own countries. Thus, though he wasn't doing economics, he was playing a part in the war against Fascism or Capitalism or whatever. But, Markets won that war everywhere. It doesn't matter how many people you recruit for the KGB or how severely you critique 'mainstream' theory. The inefficient are replaced by the slightly less inefficient.
I have argued in this essay that it is possible to
interpret Sraffa’s departures in terms of
the communicational role of economic
theory in matters of general descriptive
interest (rather than seeing them as
attempts at constructing an alternative
causal theory of the determination of
prices and distribution).
Sraffa, through no fault of his own, was excluded from the affairs of his own country. He fought the good fight- as he saw it- in England but his Econ was crap and thus his victories were imaginary.
Sraffa used analytical reasoning to throw light on subjects of public discussion in political and social contexts.
Sadly, what people wanted was cool, shiny, stuff. Analytical reasoning doesn't cut the mustard.
In particular, he
demonstrated the unviability of the view that
profits can be seen as reflecting the productivity of capital.
Yet, if you raise the productivity of any capital you own, you end up with a bigger profit. Why not demonstrate the unviability of getting richer by having lots more money?
More constructively, Sraffa’s
work throws light on the importance of value
theory in perspicacious description.
Value theory can enable you to describe Elon Musk as a very poor Guatemalan cat. It is totes illegal for the Donald to allow him into the Oval office because HE IS AN ILLEGAL MIGRANT! Also, he is a cat. I like cats but I'd never put one in charge of a Government Department. Frankly, their attention span is somewhat lacking.
The
contrast between utility-based and costbased interpretation of prices belongs to the
world of pertinent description and social discussion, and the rival descriptions are of
general interest; these have been invoked in
the past and remain relevant today.
No. I recall the teacher of our Trade Theory class coming in looking very mournful back in 1981. He said he'd been teaching Hicks style fix-price/flex-price models for years and was a devout believer in downwardly sticky wages. Then the LSE cut his nominal salary! That's when the penny finally dropped. We needed to get out of Econ and into something yet more boring- like Accountancy.
The
inquiry into alternative descriptions differs
from the subject of causal determination of
prices, in which both demand and supply
sides would tend to be simultaneously
involved.
There is an obvious similarity here with
John Hicks’s (1940, 1981) classic clarification that while utility and costs are both
needed in a theory of price determination,
when it comes to “the valuation of social
income,” utility and costs provide two alternative ways of interpreting prices, with
respectively different implications on the
understanding of social or national income.
The measurement of social income “in real terms may mean valuation in terms of utility, or in respect of cost, and that these two
meanings are in principle different” (Hicks
1981, p. 142).
Welfare is about consumer surplus. If the price of a thing in inelastic demand falls, less is spent on it though welfare may have increased a lot. This is known as the 'income effect' of the price fall.
In pursuing the descriptive distinction
between utility and costs, Sraffa attached
importance to the demonstration that his
account of the cost-based story (as in Sraffa
1960) draws exclusively on observed information, rather than having to invoke any
counterfactual presumptions.
Sadly, Sraffa's toy economy is 'incompossible'- i.e. can't exist in the real world. It isn't even 'counter-factual'. It is out and out a fairy story.
This differs
from the utility-based picture, since the
concept of marginal utility is constitutively
counterfactual.
Nope. It is the benefit gained from the last unit consumed.
How methodologically significant this distinction—between descriptions with or without counterfactuals—in
fact is remains an open question (I confess
to having remained a skeptic), but it is a
subject to which Sraffa himself attached
very great importance.
He was a true believer and didn't want nice looking hypotheses- which were secretly syphilitic ho-bags- smuggling their way into his brain.
It also relates to
other methodological features of Sraffa’s
analysis, including his strenuous—but
entirely correct—insistence that his analysis
does not need any assumption of constant
returns to scale.
This is disputed. The plain fact is the Leontief-Sraffa matrix is strictly first order homogenous. The suspicion is that it was supplied by Ramsey. Still, this isn't the big problem with it as I have explained elsewhere.
The temptation to see Sraffa’s contribution as a causal theory of price determination (managing, mysteriously, without giving any
role to demand conditions) must be resisted.
Whereas the temptation to truthfully declare his work to be stupid and useless should be embraced strenuously.
Everything here turns on the meaning of “determination” and the usage of that term on which Sraffa draws. The sense of “determination” invoked by Sraffa concerns the
mathematical determination of one set of
facts from another set.
In which case there is a unique price vector. What is it? Dunno. Thus, there is no fucking determination in Sraffa's system. But this was also true of Arrow-Debreu. Stupidity was nobody's monopoly back then.
To illustrate the point
(with a rather extreme example) a sundial
may allow us to “determine” what time it is
by looking at the shadow of the indicator
(gnomon), but it is not the case that the
shadow of the indicator “causally determines” what time it is.
Yes it is. The Sun causes rays of light to fall on the gnomon which causes a shadow to indicate the time. This is a causal sequence. Moreover, it is a unique determination.
The value of a clock
does not lie in its ability to “fix”—rather than
“tell”—the time of day.
The value of a clock lies in our ability to fix it to tell the time. Sen thinks clocks don't have to be set up to run properly.
It would have been very surprising if, in
his economic analysis, Piero Sraffa were not
influenced by his own philosophical position,
and had stayed within the rather limited
boundaries of positivist or representational
reasoning commonly invoked in contemporary mainstream economics.
He stayed within a Leftist tradition which drew on Marx. He was not in the 'positivist' or 'representational' tradition. He was neither predicting economic outcomes nor describing economic institutions.
In addressing
foundational economic issues of general
social and political interest (some of which
have been discussed over two hundred
years), Sraffa went significantly beyond
those narrow barriers.
in order to write nonsense.
It is, I suppose, comforting to know that there were not many
Piero Sraffas, but one.
This would only be comforting to know if we suspected that a Piero Sraffa may be lurking under our bed and another Sraffa- with an axe- might be hiding in the closet.
