Modern long-period literature defines long-period prices as prices yielding a uniform profit rate. This definition relies on the assumption of free competition, which is not essential in defining long-period prices, the reproducibility of the economic system being the essential condition. A definition of long-period prices based only on reproducibility is then proposed and a model developed. The existence of long-period price vectors is obtained in a variety of situations yielding differential or uniform profits rates. Our analysis shows that the long-period approach is “robust” with respect to the elimination of the significant but problematic assumption of uniform profit rates. Our model provides also a formalization of Smith’s view of domestic and international division of labour.
Freeing long-period prices from the uniform profit rate assumption: A general model of long-period positions
D'Agata Antonio
2018-01-01
Abstract
Modern long-period literature defines long-period prices as prices yielding a uniform profit rate. This definition relies on the assumption of free competition, which is not essential in defining long-period prices, the reproducibility of the economic system being the essential condition. A definition of long-period prices based only on reproducibility is then proposed and a model developed. The existence of long-period price vectors is obtained in a variety of situations yielding differential or uniform profits rates. Our analysis shows that the long-period approach is “robust” with respect to the elimination of the significant but problematic assumption of uniform profit rates. Our model provides also a formalization of Smith’s view of domestic and international division of labour.File | Dimensione | Formato | |
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Freeing long-period prices from the uniform profit rate hypothesis.pdf
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