Death Rattle Of Neoclassical Theory Of Value

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Robert Vienneau

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Sep 11, 2003, 2:44:36 AM9/11/03
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The neoclassical theory of value and distribution is mistaken. I have
updated my demonstration of this proposition at:

<http://csf.colorado.edu/pkt/pktauthors/Vienneau.Robert/Sraffa3.pdf>

Here's the sort of comments I had for the previous version:

"I got Sraffa3 to print beautifully! Now to find the time to work
on it."
-- Mark Patrick Witte, 4 December 1998

"reposting the same URL does not make it any more correct."
-- John J. Weatherby, 15 May 2002

"We'll have another hearty laugh at Sraffa3.pdf another time."
-- Poor Chris Auld, 1 July 2003

But nothing substantial. I don't expect substantial comments on
this version either. Most of the economists that post to sci.econ
don't seem to be the sort that are willing or capable of giving
substantial comments. (One could take umbrage at this remark, or
one could prove me wrong.)

--
Try http://csf.colorado.edu/pkt/pktauthors/Vienneau.Robert/Bukharin.html
To solve Linear Programs: .../LPSolver.html
r c A game: .../Keynes.html
v s a Whether strength of body or of mind, or wisdom, or
i m p virtue, are found in proportion to the power or wealth
e a e of a man is a question fit perhaps to be discussed by
n e . slaves in the hearing of their masters, but highly
@ r c m unbecoming to reasonable and free men in search of
d o the truth. -- Rousseau

Mark Witte

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Sep 11, 2003, 10:45:10 PM9/11/03
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Robert Vienneau <rv...@see.sig.com> wrote in message news:<rvien-E14E5E....@news.dreamscape.com>...

> The neoclassical theory of value and distribution is mistaken. I have
> updated my demonstration of this proposition at:
>
> <http://csf.colorado.edu/pkt/pktauthors/Vienneau.Robert/Sraffa3.pdf>
>
> Here's the sort of comments I had for the previous version:
>
> "I got Sraffa3 to print beautifully! Now to find the time to work
> on it."
> -- Mark Patrick Witte, 4 December 1998

Randall Jarrell once said something like, "even worse for a serious
fellow than ridicule is to be ignored", or perhaps rather than
"serious", it was "dull", but with the same intent. With that concern
in mind, I thought I had long ago given my thoughts on a version of
this piece, evidently further perfected as of September, 2003. Unlike
some of its predecessors, I do not find any elementary errors that
should stop the reader in his or her tracks. There is something of a
puzzle though, as to the intent of the piece. In reviewing an
academic paper, the question in the reader's mind should always be,
why was this written? What intellectual purpose did the author
intend? The piece is entitled, "A Critique Of Disaggregated
Neoclassical Theory" and draws upon the work of Sraffa. This paper
visits the currently sleep area of value theory and seems to emphasize
that general equilibrium models are complicated and can produce
results that can seem bizarre. This is not a particularly novel
result, and the author does not seem to be making any claim toward any
original contribution here. What substantial comments could be made?
Most readers would likely want to know how would applying the
approaches or results in this paper produce differences from the
findings in some well cited papers in the literature. Perhaps the
next time this paper surfaces, the value of Sraffa's work for its
ability to improve upon standard methods in modeling the observed
world will be explained.

Robert Vienneau

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Sep 13, 2003, 6:49:33 AM9/13/03
to
In article <acec624d.03091...@posting.google.com>,
econg...@hotmail.com (Mark Witte) wrote:

> Robert Vienneau <rv...@see.sig.com> wrote in message
> news:<rvien-E14E5E....@news.dreamscape.com>...
> > The neoclassical theory of value and distribution is mistaken. I have
> > updated my demonstration of this proposition at:
> >
> > <http://csf.colorado.edu/pkt/pktauthors/Vienneau.Robert/Sraffa3.pdf>
> >
> > Here's the sort of comments I had for the previous version:
> >
> > "I got Sraffa3 to print beautifully! Now to find the time to work
> > on it."
> > -- Mark Patrick Witte, 4 December 1998

> [ Long winded nothing - deleted. ]

> I do not find any elementary errors that
> should stop the reader in his or her tracks.

> [ Long winded nothing - deleted. ]

> This paper visits the currently sleep area of value theory

> [ Long winded nothing - deleted. ]

Perhaps Mr. Witte is correct. Mainstream economists do not currently
have any theory of how many and for how much commodities are sold.
And they do not care that they do not have any such theory.

> > "reposting the same URL does not make it any more correct."
> > -- John J. Weatherby, 15 May 2002
> >
> > "We'll have another hearty laugh at Sraffa3.pdf another time."
> > -- Poor Chris Auld, 1 July 2003

> > But nothing substantial. I don't expect substantial comments on
> > this version either. Most of the economists that post to sci.econ
> > don't seem to be the sort that are willing or capable of giving
> > substantial comments. (One could take umbrage at this remark, or
> > one could prove me wrong.)

When one person says a paper is correct and another says it is
wrong, a puzzle is raised.

Anyways, I have shown the following remark is mistaken:

"Reswitching poses a serious problem for capital aggregation
and measurement, and that's about it."
-- Poor Chris Auld, 9 April 1999

Perhaps Mr. Witte can tell us if he agrees that Chris Auld's statement
is incorrect.

Shmuel (Seymour J.) Metz

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Sep 16, 2003, 9:39:01 PM9/16/03
to
In <rvien-E14E5E....@news.dreamscape.com>, on 09/11/2003

at 02:44 AM, Robert Vienneau <rv...@see.sig.com> said:

>But nothing substantial. I don't expect substantial comments on this
>version either.

Certainly not. The alert reader will note the inappropriate cross
posting and write you off as a crank.

--
Shmuel (Seymour J.) Metz, SysProg and JOAT

Unsolicited bulk E-mail will be subject to legal action. I reserve
the right to publicly post or ridicule any abusive E-mail.

Reply to domain Patriot dot net user shmuel+news to contact me. Do
not reply to spam...@library.lspace.org

Robert Vienneau

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Sep 17, 2003, 3:19:47 PM9/17/03
to
In article <3f67bb36$6$fuzhry+tra$mr2...@news.patriot.net>, "Shmuel
(Seymour J.) Metz" <spam...@library.lspace.org.invalid> wrote:

> In <rvien-E14E5E....@news.dreamscape.com>, on 09/11/2003
> at 02:44 AM, Robert Vienneau <rv...@see.sig.com> said:

<http://csf.colorado.edu/pkt/pktauthors/Vienneau.Robert/Sraffa3.pdf>

> >But nothing substantial. I don't expect substantial comments on this
> >version either.

> Certainly not. The alert reader will note the inappropriate cross
> posting and write you off as a crank.

A lot of the regular posters to sci.math seem to me to participate
in certain threads for amusement.

Are you aware of the interventions of, say, the physicist John
Blatt into economics - for example, "How Economists Misuse
Mathematics"?

Are you aware of the collaboration between the mathematician
Norman Levitt and the biologist Paul Gross? (I'm not happy with
some of the contents of their work, but I can respect their
motivation.)

I can go on.

Kent Paul Dolan

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Sep 17, 2003, 4:47:14 PM9/17/03
to
"Robert Vienneau" <rv...@see.sig.com> wrote:

"Shmuel (Seymour J.) Metz" <spam...@library.lspace.org.invalid> wrote:

>> Certainly not. The alert reader will note the inappropriate cross
>> posting and write you off as a crank.

> I can go on.

Please don't, as you have not yet taken the point. A mathematician
who wants to read about economic theory has no need for you to thrust
it in his or her face; that mathematician is quite capable of finding
the sci.econ* desmene on his or her own. Mathematicians, strange as
it may seem to your desire to wallpaper the net with your words, come
to sci.math to read about math, not economics.

xanthian.


--
Posted via Mailgate.ORG Server - http://www.Mailgate.ORG

Robert Vienneau

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Sep 17, 2003, 7:56:12 PM9/17/03
to
In article
<8370fa18ff28632870b...@mygate.mailgate.org>, "Kent
Paul Dolan" <xant...@well.com> wrote:

> Please don't, as you have not yet taken the point. A mathematician
> who wants to read about economic theory has no need for you to thrust
> it in his or her face;

I'm not sure how any post on Usenet can be said to be "thrust"
anything in one's face. I quite understand that some may choose
to skip certain posts, threads, etc.

> that mathematician is quite capable of finding
> the sci.econ* desmene on his or her own. Mathematicians, strange as
> it may seem to your desire to wallpaper the net with your words, come
> to sci.math to read about math, not economics.

Thank you for your comments.

sci.math seems to me to be a healthy community. And it seems to me
that many threads are not about serious math. In fact, some of the
regular posters here seem to me seem to participate in certain
threads for amusement.

By the way, do you think John Blatt's paper "How Economists Misuse
Mathematics" might have something to do with math? How about
the demonstration of logical problems with certain mathematical
models used in applied fields. Might that have something to do with
math?

Mark Witte

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Sep 18, 2003, 9:58:17 PM9/18/03
to
Robert Vienneau <rv...@see.sig.com> wrote in message news:<rvien-38CB24....@news.dreamscape.com>...

Perhaps if posters would spend more time reading than deleting,
they might have seen the following:

"What substantial comments could be made?
Most readers would likely want to know how would applying the
approaches or results in this paper produce differences from the
findings in some well cited papers in the literature. Perhaps the
next time this paper surfaces, the value of Sraffa's work for its
ability to improve upon standard methods in modeling the observed
world will be explained."


>

Kent Paul Dolan

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Sep 19, 2003, 2:17:43 AM9/19/03
to
"Robert Vienneau" <rv...@see.sig.com> wrote

> Thank you for your comments.

> sci.math seems to me to be a healthy community. And it seems to me
> that many threads are not about serious math.

Sorry, obdurate ignorance stops being amusing immediately. Go away.

Robert Vienneau

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Sep 20, 2003, 4:10:05 PM9/20/03
to
Note follow-ups.

> Robert Vienneau <rv...@see.sig.com> wrote in message
> news:<rvien-38CB24....@news.dreamscape.com>...
> > In article <acec624d.03091...@posting.google.com>,
> > econg...@hotmail.com (Mark Witte) wrote:
> >
> > > Robert Vienneau <rv...@see.sig.com> wrote in message
> > > news:<rvien-E14E5E....@news.dreamscape.com>...

<http://csf.colorado.edu/pkt/pktauthors/Vienneau.Robert/Sraffa3.pdf>

> > > This paper visits the currently sleep area of value theory

> > > [ Long winded nothing - deleted. ]

> > Perhaps Mr. Witte is correct. Mainstream economists do not currently
> > have any theory of how many and for how much commodities are sold.
> > And they do not care that they do not have any such theory.

> > When one person says a paper is correct and another says it is


> > wrong, a puzzle is raised.
> >
> > Anyways, I have shown the following remark is mistaken:
> >
> > "Reswitching poses a serious problem for capital aggregation
> > and measurement, and that's about it."
> > -- Poor Chris Auld, 9 April 1999
> >
> > Perhaps Mr. Witte can tell us if he agrees that Chris Auld's statement
> > is incorrect.

Notice how Mr. Witte refuses to answer the question.



> Perhaps if posters would spend more time reading than deleting,
> they might have seen the following:
>
> "What substantial comments could be made?
> Most readers would likely want to know how would applying the
> approaches or results in this paper produce differences from the
> findings in some well cited papers in the literature. Perhaps the
> next time this paper surfaces, the value of Sraffa's work for its
> ability to improve upon standard methods in modeling the observed
> world will be explained."

Actually, I was being kind to Mr. Witte to describe his comments as
"nothing". A good part of them, including the part he repeats,
are less than zero. Obviously, he hasn't read the paper at that
site with understanding. For example, that paper contains:

Even if economists cannot state sufficient general assumptions
to ensure the validity of the neoclassical theory of value and
distribution, one might discuss whether reswitching is empirically
likely. Such a discussion is a change of subject from the lack
of logical foundation for the stories economists tell with the
neoclassical version of the theory of supply and demand.

My paper doesn't make the point that certain work closely akin to
Sraffa's is used for empirical analysis:

"There were many theorems and lemmas to be learned from Production
of Commodities by Means of Commodities. But for the savvy
youngsters in the Leontief circle, many were not new."
-- Paul A. Samuelson, "The Special Thing I Learned from
Sraffa", in _Value, Distribution, and Capital:
Essays in Honour of Pierangelo Garegnani_. Routledge, 1999.

Mr. Witte can pretend as long as he likes that the question I
raise is the relative empirical strength of two internally consistent
theories, a neoclassical one and another Sraffian theory. And he
of course is free to refuse to address questions actually raised
in the literature.

...one must conclude that at present there is no defensible
neoclassical theory (in the sense of explanation) of prices and
distribution. The onus is on the neoclassicals to show that this
is not so. Unless and until they succeed, it seems reasonable to
turn to different, non-neoclassical approaches to value and
distribution (and employment and growth)."
-- Fabio Petri, "Professor Hahn on the 'neo-Ricardian' Criticism
of Neoclassical Economics", in _Value, Distribution, and Capital:
Essays in Honour of Pierangelo Garegnani_. Routledge, 1999.

Personally, I'm of the opinion that one's ability to understand the
world is improved by throwing out internally inconsistent theories.

To conclude, Mr. Witte has yet to put forth any substantial comments
on this paper:

<http://csf.colorado.edu/pkt/pktauthors/Vienneau.Robert/Sraffa3.pdf>

A review of a romantic comedy complaining it does not work as an
action adventure is not a substantial review.

Mark Witte

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Sep 21, 2003, 10:55:41 PM9/21/03
to
> Notice how Mr. Witte refuses to answer the question.

In the end, the only answer is the question, "Does this matter?"
I'll repeat the question I asked, "Most readers would likely want to


know how would applying the approaches or results in this paper
produce differences from the
findings in some well cited papers in the literature. Perhaps the
next time this paper surfaces, the value of Sraffa's work for its
ability to improve upon standard methods in modeling the observed
world will be explained."

Without an answer to this basic line of questions, this paper will
continue to be greeted with indifference. I believe that the author
of the paper would say that the results described have all been around
since the work of Sraffa in the 1960s. With forty years to try to
find some relevance to describing the world, the importance of this
work seems slight.

[I deleted the sci.math cross-post out of common decency.]

Robert Vienneau <rv...@see.sig.com> wrote in message news:<rvien-0CE244....@news.dreamscape.com>...

Robert Vienneau

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Sep 23, 2003, 3:55:21 AM9/23/03
to
In article <acec624d.03092...@posting.google.com>,
econg...@hotmail.com (Mark Witte) wrote:

> > > > "Reswitching poses a serious problem for capital aggregation
> > > > and measurement, and that's about it."
> > > > -- Poor Chris Auld, 9 April 1999

> > > > Perhaps Mr. Witte can tell us if he agrees that Chris Auld's
> > > > statement
> > > > is incorrect.

> > Notice how Mr. Witte refuses to answer the question.

> In the end, the only answer is the question, "Does this matter?"

Mr. Witte seems not to know what an answer is. For example, an
answer would start with "Yes" or "No".

Perhaps Mr. Witte can tell us if he agrees that Chris Auld's
statement is incorrect.

> I'll repeat the question I asked, "Most readers would likely want to


> know how would applying the approaches or results in this paper
> produce differences from the
> findings in some well cited papers in the literature.

I would hope many readers might wonder also why textbooks are full of
outdated, exploded, inconsistent, and contradictory theories.

M. I. Naples and N. Aslanbeigui, "What DOES Determine the Profit
Rate? The Neoclassical Theories Presented in Introductory
Textbooks", Cambridge Journal of Economics, V. 20, pp. 53-71, 1996.

> Perhaps the
> next time this paper surfaces, the value of Sraffa's work for its
> ability to improve upon standard methods in modeling the observed
> world will be explained."
>
> Without an answer to this basic line of questions, this paper will
> continue to be greeted with indifference. I believe that the author
> of the paper would say that the results described have all been around
> since the work of Sraffa in the 1960s.

No. My paper contains at least one original speculation, namely in
the last paragraph of 2.4.

"What counts though are the big insights a genius brings to an
important problem of science. By this test Piero Sraffa is not
fully recognized in the mainstream literature."


-- Paul A. Samuelson, "The Special Thing I Learned from
Sraffa", in _Value, Distribution, and Capital:
Essays in Honour of Pierangelo Garegnani_. Routledge, 1999.

> With forty years to try to


> find some relevance to describing the world, the importance of this
> work seems slight.

Personally, I'm of the opinion that one's ability to understand the


world is improved by throwing out internally inconsistent theories.

Mr. Witte's misrepresentation has been clarified many times here. The
previous post cited Leontief's work. That PDF paper, which apparently Mr.
Witte did not read, cites Albin (1975), Rosser and Prince (1985), and
Ozanne (1996). (A number of years ago, Mr. Witte has misrepresented
the first two of these three references.) Some time ago I pointed
out that, due to price Wicksell effects, the first numbered
equation in Romer (1990) is mistaken. I'm not the only one to
have noticed:

"Vintage models have attracted the attention of neoclassical
economists for another reason. In these models, using severely
restrictive assumptions, it is possible to assign a value to
a 'heterogeneous' capital stock that is independent from
distribution (Fisher 1965, and the contribution by Petri in
this volume). Note that in these models, 'capital' is
heterogeneous in the limited sense of different efficiency of
vintages of a unique type of capital good (i.e., corn-seeds
of different efficiency). Recently, Romer (1990) adopts this
approach in an EG model without any discussion of its severe
limitations."
-- Sergio Cesaratto, "New and Old Neoclassical Growth Theory:
A Critical Assessment", in _Value, Distribution, and Capital:


Essays in Honour of Pierangelo Garegnani_. Routledge, 1999.

Also, consider

"David Laidler suggests that Sraffa was ahead of his time in
pointing out that neoclassical models based on an aggregate
production function lack proper microfoundations, because this
is a far more telling criticism of modern real business cycle
theory, whose exponents make strong claims about such matters,
than it was of 1950s vintage growth models."
-- Avi J. Cohen and G. C. Harcourt, JEP, Winter 2003.

(Cohen is writing a book subtitled "From Bohm-Bawerk to Bliss"
and Cohen, Harcourt, and Bliss are putting together a collection
of the most important articles on capital theory.)

And there are others bringing out certain implications.

> Robert Vienneau <rv...@see.sig.com> wrote in message
> news:<rvien-0CE244....@news.dreamscape.com>...
> > Note follow-ups.
> [I deleted the sci.math cross-post out of common decency.]

What might substantial comments on the following look like?

<http://csf.colorado.edu/pkt/pktauthors/Vienneau.Robert/Sraffa3.pdf>

One might state whether the numerical examples there are correct
or not. And if one claims that they are incorrect, one might
indicate why and what a correct solution looks like.

One might indicate whether one thinks technology can be such
that the implications indicated in this paper could occur. If
one thinks technology could not be like that, one might indicate
sufficient special case assumptions on technology one is inclined
to impose such that the principle of substitution follows. Whether
one can or cannot outline such special case assumptions, one
might provide some argument for why technology could not be
like that, if one thought it cannot.

On the other hand, if one agrees with the literature
that the neoclassical theory of value and distribution is
faulty, one might indicate that one would like economists
to abandon it in their teaching and practice.

Mark Witte

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Sep 27, 2003, 6:55:32 AM9/27/03
to
Good heavens, what charming people we find on newsgroups! So, to
recap the history of this thread, I am requested, by name, to review a
piece written by this poster and offer suggestions. I do so, but then
my suggestions for making the piece more convincing are met with the
response that my past efforts to help (by attempting to explain the
rudiments of empirical testing of theory) are characterized as
"misrepresented." Ah well, charming people.

Returning to the point at hand, the originator of this thread wrote a
piece that promotes the contributions of Sraffa to modern economics.
Further, the reader asks whether Sraffa's work is important beyond
capital aggregation issues. I'll admit that I'm open minded and that
after forty years am not yet willing to give up hope that some
empirical value to Sraffa's work can be found. However, my Baysian
prior expectation for seeing such a contribution at this point is not
strong.

My main suggestion for where to go with this poster's work was to make
the usual remark that it is important to stress the way the paper
improves upon the current literature in explaining the observed world.
This need not call for formal empirical testing, although that is
generally a strong plus. I ask in what way would the central aspects
of the paper change or improve upon some major published work in
economics in the last ten years. What is the response?

> Some time ago I pointed out that, due to price Wicksell effects, the first numbered
> equation in Romer (1990) is mistaken. I'm not the only one to have noticed:
>
> "Vintage models have attracted the attention of neoclassical
> economists for another reason. In these models, using severely
> restrictive assumptions, it is possible to assign a value to
> a 'heterogeneous' capital stock that is independent from
> distribution (Fisher 1965, and the contribution by Petri in
> this volume). Note that in these models, 'capital' is
> heterogeneous in the limited sense of different efficiency of
> vintages of a unique type of capital good (i.e., corn-seeds
> of different efficiency). Recently, Romer (1990) adopts this
> approach in an EG model without any discussion of its severe
> limitations."
> -- Sergio Cesaratto, "New and Old Neoclassical Growth Theory:
> A Critical Assessment", in _Value, Distribution, and Capital:
> Essays in Honour of Pierangelo Garegnani_. Routledge, 1999.

What is the poster claiming? That Romer is wrong and that the editors
at the JPE in 1990 made a mistake? If so, submit a correction and see
how the editors respond. In support of his position that Romer's work
is in error, Mr. Vienneau quotes Casaratto here, but there is no such
support in the quote, rather just a complaint about a lack of
"discussion of its severe limitations." (Further, the Cesaratto quote
does not come from an article that has undergone formal referee
review.)

Yes, models have assumptions that come with limitations; such is the
way research works. A contribution is not to point out this well
known truth but rather to build alternative models and show how their
results contrast. Would Romer's results be overturned with a
different specification? Work it out and see, then send it in to the
editors for review and get their feedback, and maybe even get the work
published and thus into the intellectual discourse of the field. This
is how knowledge is formed and human understanding advanced, not by
repeatedly spamming newsgroups.


Robert Vienneau <rv...@see.sig.com> wrote in message news:<rvien-AB74EC....@news.dreamscape.com>...

Robert Vienneau

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Sep 28, 2003, 8:05:36 PM9/28/03
to

> Good heavens, what charming people we find on newsgroups! So, to
> recap the history of this thread, I am requested, by name, to review a
> piece written by this poster and offer suggestions.

Actually, I did not make any such explicit request of Mr. Witte in the
post kicking off this thread. I merely pointed out that although he had
promised substantial comments on a previous version of my essay in PDF,
he hasn't provided any. And he still hasn't provided substantial
comments.

> I do so,

It seems to me that the above statement can only be said to be
correct up to a point.

> but then
> my suggestions for making the piece more convincing are met with the
> response that my past efforts to help (by attempting to explain the
> rudiments of empirical testing of theory) are characterized as
> "misrepresented." Ah well, charming people.

Which doesn't change the fact that Mr. Witte's representation of
certain papers was only accurate up to a point.

> Returning to the point at hand, the originator of this thread wrote a
> piece that promotes the contributions of Sraffa to modern economics.

In particular, the piece specifically explores "the negative and
destructive aspects of Sraffa's work". And it explicitly confines
comments to constructive aspects of that work to footnotes (e.g.,
2, 16, 40).

> Further, the reader asks whether Sraffa's work is important beyond
> capital aggregation issues.

The above can only be said to be true up to a point. I show that
Sraffa's work has implications beyond problems in aggregating
physical capital. For example, I show that here:

<http://csf.colorado.edu/pkt/pktauthors/Vienneau.Robert/Sraffa3.pdf>

> I'll admit that I'm open minded

Up to a point. If Mr. Witte were open-minded, he might provide some
substantive comments on Sraffa3.pdf, which he hasn't.

> and that
> after forty years am not yet willing to give up hope that some
> empirical value to Sraffa's work can be found.

Which doesn't change the fact that there is no logical basis for
neoclassical intuition in rigorous economic theory. As is
demonstrated in a certain PDF paper.

Besides, Leontief and many building on his work have long since
demonstrated empirical uses of models much like Sraffa's models.
Which I've already said.

> However, my Baysian
> prior expectation for seeing such a contribution at this point is not
> strong.
>
> My main suggestion for where to go with this poster's work was to make
> the usual remark that it is important to stress the way the paper
> improves upon the current literature in explaining the observed world.

For example, by throwing out approaches that are logically defective.

> This need not call for formal empirical testing, although that is
> generally a strong plus. I ask in what way would the central aspects
> of the paper change or improve upon some major published work in
> economics in the last ten years. What is the response?

Once again, Mr. Witte's suggestion that the following is the
response is true only up to a point. Somehow, other parts of
the response are ignored.

And Mr. Witte's restatement of what he asks is only true up to a point.
He suggested:

"Most readers would likely want to know how would applying the
approaches or results in this paper produce differences from the
findings in some well cited papers in the literature."

Not having Mr. Witte's curious literary skills, I am unable to read
that as equivalent to:

"I ask in what way would the central aspects of the paper change
or improve upon some major published work in economics in the last
ten years."

> > Some time ago I pointed out that, due to price Wicksell effects, the
> > first numbered
> > equation in Romer (1990) is mistaken. I'm not the only one to have
> > noticed:
> >
> > "Vintage models have attracted the attention of neoclassical
> > economists for another reason. In these models, using severely
> > restrictive assumptions, it is possible to assign a value to
> > a 'heterogeneous' capital stock that is independent from
> > distribution (Fisher 1965, and the contribution by Petri in
> > this volume). Note that in these models, 'capital' is
> > heterogeneous in the limited sense of different efficiency of
> > vintages of a unique type of capital good (i.e., corn-seeds
> > of different efficiency). Recently, Romer (1990) adopts this
> > approach in an EG model without any discussion of its severe
> > limitations."
> > -- Sergio Cesaratto, "New and Old Neoclassical Growth Theory:
> > A Critical Assessment", in _Value, Distribution, and Capital:
> > Essays in Honour of Pierangelo Garegnani_. Routledge, 1999.

> What is the poster claiming? That Romer is wrong and that the editors
> at the JPE in 1990 made a mistake? If so, submit a correction and see
> how the editors respond.

The above doesn't seem to be substantive. I say that, due to price
Wicksell effects, it is a mistake to use capital goods as arguments
in production functions when the quantities of those goods are
measured in units of dollars or in units of a numeraire. Notice
that Mr. Witte has nothing substantive to say on this point.

> In support of his position that Romer's work
> is in error, Mr. Vienneau quotes Casaratto here, but there is no such
> support in the quote, rather just a complaint about a lack of
> "discussion of its severe limitations."

The above is only true up to a point. Casaratto is understated in
his conclusions. But the substance of his point is related to
mine. To see that, you have to be willing to read for understanding.
Of course, if you don't understand what a price Wicksell effect is,
despite my repeated explanations, you will not understand my point.

> (Further, the Cesaratto quote
> does not come from an article that has undergone formal referee
> review.)

Which is beside the point. I would be honored, myself, to be published
in a book in which Paul Samuelson is also submitting articles.

By the way,

"Reswitching poses a serious problem for capital aggregation
and measurement, and that's about it."
-- Poor Chris Auld, 9 April 1999

Perhaps Mr. Witte can tell us if he agrees that Chris Auld's statement
is incorrect.

--

Mark Witte

unread,
Oct 3, 2003, 7:15:52 PM10/3/03
to
The originator of this thread begs for folks to read his posts and
offer opinions, and I'll try once more to oblige. He wants to know if
I agree with the following:

"Reswitching poses a serious problem for capital aggregation
and measurement, and that's about it."

-- Dr. Chris Auld, 9 April 1999

I agree with the first part, and I just don't know about the second
part. As I have repeatedly asked, how does the approach outlined in
the first installment of this (and many nearly identical) threads
improve upon the standard approach in the field? In answer we are
offered a difference in the modeling of Romer (1990). Did the editors
of the JPE allow in a paper with an error in it? In support of this
claim we get a quote from an un-refereed paper by Cesaratto (and while
I would be honored to clean Samuelson's pool, merely appearing in a
packet of essays in honour of someone along with a chatty piece by
Samuelson is not exactly careful vetting). Casaretto complains of a
lack of a discussion in Romer's paper of its "limitations." Yes, yes,
models are simplifications of reality, this is by definition true, and
the real question is whether the model is correct (not possessing
"limitations") and useful.

So, out of all the major recent papers in economics, the material in
this post merely contests the generality of the model in one paper and
offers no alternative empirical explanations by which we can compare
the usefulness of this alternative model specification. Like I said,
I don't know for sure that this stuff is unimportant, but its
adherents sure are making it seem so.

Robert Vienneau <rv...@see.sig.com> wrote in message news:<rvien-3C133E....@news.dreamscape.com>...

Robert Vienneau

unread,
Oct 5, 2003, 2:19:36 AM10/5/03
to
In article <acec624d.03100...@posting.google.com>,
econg...@hotmail.com (Mark Witte) wrote:

> Robert Vienneau <rv...@see.sig.com> wrote in message

> > I say that, due to price


> > Wicksell effects, it is a mistake to use capital goods as arguments
> > in production functions when the quantities of those goods are
> > measured in units of dollars or in units of a numeraire. Notice
> > that Mr. Witte has nothing substantive to say on this point.

> The originator of this thread begs for folks to read his posts and
> offer opinions,

Mr. Witte begins with a demonstration that he is incapable of a
serious discussion.

> and I'll try once more to oblige. He wants to know if
> I agree with the following:
>
> "Reswitching poses a serious problem for capital aggregation
> and measurement, and that's about it."
> -- Dr. Chris Auld, 9 April 1999
>
> I agree with the first part, and I just don't know about the second
> part. As I have repeatedly asked, how does the approach outlined in
> the first installment of this (and many nearly identical) threads
> improve upon the standard approach in the field?

Mr. Witte once again is just pretending. He seems to want to
see empirical evidence that the price theory outlined in

<http://csf.colorado.edu/pkt/pktauthors/Vienneau.Robert/Sraffa3.pdf>

is superior to some other unspecified theory. But, as I
have explained repeatedly, there is no such other theory. (Part
of Samuelson's point in his suppposedly "chatty" article is
there is no other (long-period) price theory than Sraffa's.)
Not only does Mr. Witte not outline any such other theory, he
basically refuses to say anything that is not question-begging, a
fallacy.

Recall, my question for years has been, "What are your assumptions?"
Mr. Witte cannot and will not answer this question. For example,
he does not specify any assumptions I make that are not assumptions
of some "standard approach". Nor does he specify any assumptions
of some "standard approach" that rule out my example. His nonanswer
is that assumptions do not need to be realistic.

In other words, Mr. Witte seems to be incapable of saying
anything substantial, non-fallacious, and on topic, as he has
demonstrated once again.

Mark Witte

unread,
Oct 6, 2003, 12:14:39 AM10/6/03
to
Let's see...this thread is labeled what? Ah yes, there it is: "Death
Rattle Of Neoclassical Theory Of Value."

So, we ask, how does what is presented here challenge how
economists view the world? What is the contribution? Are many
standard models somehow wrong? In support of this we are told that
Casaretto feels that Romer's 1990 JPE piece gives insufficient due to
the "limitations" of its approach. Ouch, has anyone ever heard such a
forceful rebuke?

If the many models in common use in economics, each with its own
set of assumptions, are not flawed in their basic formation, than what
does this thread offer those who seek to improve their understanding
of the world we observe? Without answer to this question, the sound
of the rest of this thread will mimic that of one hand clapping.

Robert Vienneau <rv...@see.sig.com> wrote in message news:<rvien-5BBE89....@news.dreamscape.com>...


> In article <acec624d.03100...@posting.google.com>,
> econg...@hotmail.com (Mark Witte) wrote:
>
> > Robert Vienneau <rv...@see.sig.com> wrote in message
>
> > > I say that, due to price
> > > Wicksell effects, it is a mistake to use capital goods as arguments
> > > in production functions when the quantities of those goods are
> > > measured in units of dollars or in units of a numeraire. Notice
> > > that Mr. Witte has nothing substantive to say on this point.
>
> > The originator of this thread begs for folks to read his posts and
> > offer opinions,
>
> Mr. Witte begins with a demonstration that he is incapable of a
> serious discussion.
>
> > and I'll try once more to oblige. He wants to know if
> > I agree with the following:
> >
> > "Reswitching poses a serious problem for capital aggregation
> > and measurement, and that's about it."
> > -- Dr. Chris Auld, 9 April 1999
> >
> > I agree with the first part, and I just don't know about the second
> > part. As I have repeatedly asked, how does the approach outlined in
> > the first installment of this (and many nearly identical) threads

> > improve upon the standard approach in the field? ? In answer we are


> > offered a difference in the modeling of Romer (1990). Did the editors
> > of the JPE allow in a paper with an error in it? In support of this
> > claim we get a quote from an un-refereed paper by Cesaratto (and while
> > I would be honored to clean Samuelson's pool, merely appearing in a
> > packet of essays in honour of someone along with a chatty piece by
> > Samuelson is not exactly careful vetting). Casaretto complains of a
> > lack of a discussion in Romer's paper of its "limitations." Yes, yes,
> > models are simplifications of reality, this is by definition true, and
> > the real question is whether the model is correct (not possessing
> > "limitations") and useful.
> >
> > So, out of all the major recent papers in economics, the material in
> > this post merely contests the generality of the model in one paper and
> > offers no alternative empirical explanations by which we can compare
> > the usefulness of this alternative model specification. Like I said,
> > I don't know for sure that this stuff is unimportant, but its
> > adherents sure are making it seem so.
>

susupply

unread,
Oct 6, 2003, 9:56:29 AM10/6/03
to

"Mark Witte" <econg...@hotmail.com> wrote in message
news:acec624d.03100...@posting.google.com...

> If the many models in common use in economics, each with its own
> set of assumptions, are not flawed in their basic formation, than what
> does this thread offer those who seek to improve their understanding
> of the world we observe? Without answer to this question, the sound
> of the rest of this thread will mimic that of one hand clapping.

Much to be preferred to his usual one hand patting himself on the back.


Robert Vienneau

unread,
Oct 6, 2003, 4:23:46 PM10/6/03
to

> So, we ask, how does what is presented here challenge how
> economists view the world?

Although important, questions of aggregation do not exhaust the
Sraffa critique. In particular, Sraffians claim to have
undermined notions of substitution and to have shown long run
equilibrium prices do not measure relative scarcity of factors.
These ideas seem to be central to the neoclassical theory of
value and distribution. A factor price reflects its scarcity when
the adoption of a technique using that factor less intensively is
associated with a higher equilibrium price. That is, a higher
factor price is associated with a choice to substitute other
inputs for the relatively more expensive factor. Reliance on
this sort of intuition has long been the basis for the
'practical' stories neoclassical economists tell. For example:

Let us then suppose thatŠthere is a strike on the part
of one group of workers, say the plasterers, or that there
is some other disturbance to the supply of plasterers'
labourŠThe rise in plasterers¹ wages would be checked if it
were possible either to avoid the use of plaster, or to get
the work done tolerably well and at a moderate price by
people outside the plasterers' trade: the tyranny, which
one factor of production of a commodity might in some cases
exercise over the other factors through the action of
derived demand, is tempered by the principle of substitution.
(Marshall 1920, Book V, Chapter VI)

An analogous condition arises in consumption. The idea that
equilibrium prices would be scarcity indices if it were not for
imperfections in competition and impediments to the perfect
operation of markets seems intuitive and was often thought to be
self-evident among neoclassical theorists.

The core of this paper consists of a simple numerical example
demonstrating that long run equilibrium prices are not scarcity
indices.
<http://csf.colorado.edu/pkt/pktauthors/Vienneau.Robert/Sraffa3.pdf>

> What is the contribution? Are many standard models somehow wrong?

Yes. As I've said. And as is pointed out in the literature. For
example:

"David Laidler suggests that Sraffa was ahead of his time in
pointing out that neoclassical models based on an aggregate
production function lack proper microfoundations, because this
is a far more telling criticism of modern real business cycle
theory, whose exponents make strong claims about such matters,
than it was of 1950s vintage growth models."
-- Avi J. Cohen and G. C. Harcourt, JEP, Winter 2003.

"since both groups of versions of marginalist equilibrium theory -
the long-period versions and the neo-Walrasian versions - encounter
what appear to be radical and insurmountable difficulties, one


must conclude that at present there is no defensible neoclassical
theory (in the sense of explanation) of prices and distribution.
The onus is on the neoclassicals to show that this is not so.
Unless and until they succeed, it seems reasonable to turn to
different, non-neoclassical approaches to value and distribution
(and employment and growth)."
-- Fabio Petri, "Professor Hahn on the 'neo-Ricardian' Criticism

of Neoclassical Economics", in _Value, Distribution, and Capital:
Essays in Honour of Pierangelo Garegnani". Routledge, 1999.

"Both classical and marginalist economists provided accounts of
the long-period (uniform rate of profit) theory of value and
distribution, but whereas a classical economist could take the
real wage as a datum for the purpose of such analysis (whatever
the implicit 'background' theory of wages might be), the
marginalist economist had to 'close the system' in some other
manner. In effect, since 'resource supplies' were often taken as
given, this meant that 'the supply of capital' had to be taken
as given, IN ONE WAY OR ANOTHER. Just how the given supply of
capital was to be represented was an issue that led to
considerable heterogenity amongst even those marginalist
economists who shared the long-period method of analysis with
the classical economists and with each other. That heterogenity
cannot be entered into here (see Kurz and Salvadori, 1995:
427-43) but it is now widely recognized that each version of
such traditional long-period marginalist theory of value and
distribution encountered insoluble problems (ibid.: 443-48)."
-- Ian Steedman (1998)

"The intractable problems created by the effort to extend into
the unobservable future the terrain over which the forces of
supply and demand hold sway are somehow set aside as questions
that will ultimately yield to a more sophisticated analysis.
Meanwhile, the existence of an alternative framework of thought
based on a revival of classical theory is denied. Certainly
the critics of neoclassical theory committed a great heresy
during the capital theory debate by proving false the analytical
basis for the principle of substitution in so far as it affects
the demand for capital and labour. Those who would defend
neoclassical theory against any attack on its logical structure
fail to see the significance of this result. This is because
they have given up any causal claims for general equilibrium
theory..., thus abandoning the traditional notion of equilibrium
as a centre of gravity relative to which prices and quantities
fluctuate. The revival of interest in classical theory is, in
part, a revival of interest in this old-fashioned idea. It is
also a revival of interest in a broadly based theory that does
not presume to find the essence of all market phenomena in
terms of the single principle of substitution."
-- Harvey Gram, 1990.

"Thus the reswitching anomaly, along with its theoretical developments
and implications, has been placed in abeyance. And so it must be, for
if this criticism were taken as being no less applicable to the real
world than the theoretical, then it follows, as already noted, that
orthodox economics is unable to make any reliable statements concerning
the relationship of production to the various input markets. That is,
the neoclassical vision of a market-coordinated production system,
along with derivative growth and distribution theories, are all
invalidated. As a consequence, the nature of the entire traditional
circular flow conception is called into question...

...It is one thing to say that this conception of indirect economic
management does not satisfactorily achieve its goals because of the
existence of such real-world problems as bottlenecks, power, premature
inflation, inflationary expectations, random shocks, ratchet and
spillover effects, and the like. In such situations, an economically
coherent and consistent market-based system of production and
distribution is still assumed to exist, though it is overlaid with
political, institutional, and psychological factors that affect
economic adjustments and performance. The basic strategy, in this case,
would be to maintain the general neoclassical-synthetic emphasis on
fiscal and monetary management (with perhaps somewhat greater stress on
the monetary tool, if the monetarists were to have their way), and
supplement these tools with finely targeted direct and specific
devices - for example, stricter antitrust enforcement, more sharply
focused incentive (and disincentive) taxes, expanded job training and
subsidization programs - so as to allow and encourage the effective
functioning of centerpiece fiscal and monetary devices.

It is quite another thing to argue that key markets in the system,
particularly those in the resource or input sector, do not possess the
fundamental economic characteristics necessary to the orderly
systematic functioning that is postulated by mainstream theory..."
-- Richard X. Chase, "Production Theory," in _A Guide to
Post-Keynesian Economics_, (edited by Alfred S. Eichner), M. E.
Sharpe, 1978, p. 79-80

"...Specifically,
it must be shown that under ideal conditions, i.e. perfect
competition and absence of disturbing elements like uncertainty
and money, one or more markets do not function properly so that,
even in the long run, no tendency towards full employment exists:
the problem is *not* about possible market failures, but about
principles.

This task has been accomplished by the capital-theory debate, the
main economic implications of which are set out in Garegnani (1970),
Kurz (1985) and Pasinetti (1974, pp. 132-42; 1977, pp. 169-77);
a comprehensive and easily understandable presentation of the crucial
issues is Harcourt (1972).

...As a consequence, no regular (downward-sloping)
associations between profit rates, on the one hand, and capital
and output per worker and the capital-output ratio, on the other
hand, exist. These relationships are, in fact, totally irregular.
Since the 'capital market' does not function in the neoclassical
sense and since factor markets are supposed to be interrelated,
regular *long-period* relationships between 'factor prices' and
'factor quantities' cannot exist in general, i.e. there are no
'factor markets' at all if the long run is considered. This is
the main result of the capital-theory debate...

...The fact that there are no regular relationships between 'factor
prices' and 'factor quantities' is extremely damaging for equilibrium
theory: the market cannot produce a tendency towards some postulated
long-period equilibrium to solve the central economic problems, i.e.
value, distribution and employment....

...These references to the history of the capital-theoretic discussion
show that it is a discussion about fundamentals. The basic question is
whether there are regular relationships between 'factor prices' and
'factor quantities' or not, i.e. normally functioning factor markets.
Examining this question seriously will inevitably shape an economist's
vision in a decisive way. The capital-theoretic debate is a theoretic
watershed dividing two different views of looking at socioeconomic
phenomena, i.e. neoclassical equilibrium theory which emphasizes
behavior and classical-Keynesian political economy which starts from
the functioning of the socioeconomic system, the question being which
approach is more appropriate to tackle fundamental socioeconomic
problems, such as value, distribution and employment. Therefore, as
Geoffrey Harcourt was one of the first to perceive, the Cambridge
controversies are 'not merely about the measurement of capital...but
about the scientific status of neoclassical (equilibrium) theory'
(Dixon 1988, pp. 251-2)...."
-- Heinrich Bortis, _Institutions, Behavior and Economic Theory:
A Contribution to Classical-Keynesian Political Economy_,
Cambridge University Press, 1997.

"The idea that demand and supply for factors of production determine
distribution has become so deeply ingrained in economic thought that
it is almost viewed as an immediate reflection of facts, and not as
the result of an elaborate theory. For the same reason, it is easily
forgotten how comparatively recent that theory is. In the first
systematic analysis of value and distribution by the English classical
economists up to Ricardo, we would look in vain for the conception
that demand and supply for labour and 'capital' achieve 'equilibrium'
as the proportions in which those 'factors' are employed in the
economy change with the wage and rate of profits. Thus, Ricardo saw
no inconsistency between free competition and unemployment of
labour. In his view lower wages could eliminate unemployment only
be decreasing the growth of population or by favouring accumulation...

...Outputs can influence relative prices ... by affecting the relative
scarcity of labour and capital, and thus the wage and rate of
interest, given the supply of the two factors and the state of
technical knowledge. This link between prices and outputs is one and
the same thing as the explanation of distribution by demand and supply
of factors of production: and it becomes untenable once that
explanation is abandoned.

Thus, the separation of the pure theory of value from the study of
the circumstances governing changes in the outputs of commodities,
does not seem to meet any essential difficulty. On the contrary,
it may open the way for a more satisfactory treatment of the
relations between outputs and the technical conditions of production.
Moreover, by freeing the theory of value from the assumption of
consumers' tastes given from outside the economic system, this
separation may favour a better understanding of consumption, and its
dependence on the rest of the system.

With this, the theory of value will lose the all-embracing quality
it assumed with the marginal method. But what will be lost in scope
will certainly be gained in consistency and, we may hope, in
fruitfulness."
-- P. Garegnani, RES, 1970.

> In support of this we are told that
> Casaretto feels that Romer's 1990 JPE piece gives insufficient due to
> the "limitations" of its approach. Ouch, has anyone ever heard such a
> forceful rebuke?

I say that the model in Romer 1990 is wrong from the first numbered
equation. And I say that that is so because, due to price Wicksell


effects, it is a mistake to use capital goods as arguments in
production functions when the quantities of those goods are measured

in units of dollars or in units of a numeraire. Mr. Witte has nothing


substantive to say on this point.

> If the many models in common use in economics, each with its own


> set of assumptions, are not flawed in their basic formation,

Here is where Mr. Witte begs the entire question under discussion.
Mr. Witte is just pretending.

Many models in common use in economics are flawed in their basic
formation.

Mr. Witte cannot and will not specify any assumptions I make that


are not assumptions of some "standard approach". Nor does he specify
any assumptions of some "standard approach" that rule out my example.

> than what


> does this thread offer those who seek to improve their understanding
> of the world we observe?

One's ability to understand the world is improved by throwing out
internally inconsistent theories.

"It is better to be left with an empty mind than one filled
with nonsense - with deductive inconsistencies and fanciful
empirical hypotheses."
-- Paul Samuelson

> Without answer to this question, the sound
> of the rest of this thread will mimic that of one hand clapping.

Mr. Witte has been refusing to address certain arguments in the
literature for a number of years now. And others have long since
noticed:

The basic critique being advanced is that neoclassical economics
is not capable of serving as a basis for a long-run theory of
value. A variety of responses would be in order:
(a) the argument is flawed, and neoclassical economics is capable
of serving as a basis for a long-run theory of value -- which would
be accompanied by argument to that affect unless the poster
thought their reputation was sufficiently persuasive on its own;
(b) that despite the early concern with it in neoclassical theory,
a long-run value theory is not important enough to have to worry
about it -- in which case the problems with capital theory would be
a more pressing worry;
(c) that neoclassical eocnomic theory is only one tool in the
mainstream economic toolkit, and other tools would be more
appropriate for this particular problem -- in which case a
suggestion of what these other tools are would be nice;
(d) the critique is logically valid, but that any theory that
relied on the concept of the long-run is flawed -- thus, the model
used to reveal the problem, which by the nature of the critique
must included the concept of the long-run is itself flawed.
(e) I'm not presuming to offer an exhasutive list, so extend it
from (e) on at your leisure.

This last is the basis for a kind of critical position that Mark
Witte finds invalid: if a paradigm is both instrinsically and
extrinsically flawed, a theory that can be used to reveal the
internal difficulty may well have enough in common that the
extrinsic difficulty is shared. When a theory is being critiqued,
the more assumptions of the theory that are granted while
maintaining the critique, the stronger the critique. The
neoRicardians argue that they can maintain all of the core
assumptions of the neoclassical paradigm, and still maintain their
critique, which *if true* is as good as it gets in the critique biz.
On the other hand, if the empiricial validity of a common
assumption is disputed, those who dispute the empirical validity
of that assumption can indeed say, as Davidson does (who argues
that the concept of long-run is untenable), that the neoRicardians
make an important critique of neoclassical economics, but
neoRicardian theory is not useful for explaining economies.
-- Bruce McFarling, 14 October 1995

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