Two Concepts of ‘Centre Of Gravity’: Commentary on Contributions by Gary Mongiovi and Fred Moseley

This paper was submitted to the 2001 conference of the International Working Group on Value Theory at the Eastern Economic Association. It was an initial short response to the idea, which has become common amongst Simultaneoust Marxist Economists, that in Marx’s theory, equilibrium or simultaneous prices of production play the role of a ‘centre of gravity’ around which actual prices fluctuate. A more developed response was given in Freeman (2006). In that paper and in this one, I argue that this argument, as presented by Mongiovi (2001, 2002) and by Moseley (2000) involves a non-sequitur: just because a fluctuating time-series – such as the price of production of some good or of the output of some branch of production – fluctuates around some time-average, it cannot be concluded that this time average will be equal to the hypothetical equilibrium of that series. In general, the hypothetical equilibrium follows a trajectory that is different from the moving average of the same series, and in a number of important cases – such as the trajectory of the rate of profit – the time average (calculated temporally) and the hypothetical equilibrium diverge, so that one rises whilst the other falls. The present paper providing a historical step in the genesis of this argument, being a precursor of the 2006 paper. It also however makes a distinct contribution to the discussion which appears neither in Freeman (1999), its predecessor, nor in Freeman (2006), its successor. It exhibits a simple numerical example in which the equilibrium measure of the rate of profit, and of the prices of production of each of the two sectors in the system, systematically diverges from the temporal measure. It further asks the question: can the ‘equilibrium price=centre of gravity’ thesis account for any actual fluctuating sequence of market prices, that is, actual observed sale prices? It shows, by means of a simulation, that Either the equilibrium profit is centre of gravity for sectoral profit rates, and prices diverge, Or the equilibrium price is centre of gravity for sectoral prices, and profits diverge. That is to say the notion that the equilibrium profit rate is a centre of gravity for the actual profit rate, is incompatible with the assertion that the equilibrium price of production is a centre of gravity for the actual prices corresponding to that same profit rate.