help: simple reproduction from Halevi

Steve.Keen at unsw.EDU.AU Steve.Keen at unsw.EDU.AU
Wed Oct 11 16:39:54 MDT 1995


Rakesh, I think you're getting yourself into a lather over an
interesting but, in the end, unimportant issue. Yes, if an
economy begins from zero and has to construct all its fixed
capital, and if that economy is to achieve simple reproduction,
then (a) for a while until actual depreciation matches fixed
capital output, it will grow; and (b) the demands for labor
in fixed capital output will grow dramatically.

But no society starts from zero--nor is simple reproduction a
sensible analysis for an actual economy (where labor demand
and supply issues have relevance). As an intellectual exercise
in developing models of some relevance to actual capitalism,
a model of simple reproduction is a sensible starting point,
but there is nothing illicit in such analysis with beginning
with a system which is already successfully executing simple
reproduction--i.e., your initial conditions do not have to
be "zero", they can be, for example, the equilibrium
conditions.

The point of importance in the work you are grappling with
concerns the dynamic issue of whether such an equilibrium
is stable. Alan Freeman's work in this area is of interest--
you might check out his paper (which I don't think has been
published as yet):
"A general refutation of Okishio's theorem -
and a proof of the falling rate of profit"

You might also find the paper I have posted on Sraffian
economics useful here: "Questions for Sraffians", at the
csf.colorado.edu list server.

In brief, both papers conclude that the dynamic equilibrium
of simple reproduction is in all probability unstable (though
we address different issues to reach the same conclusion).
However this instability has nothing to do with the trajectory
from a zero starting position.

Cheers,
Steve Keen


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