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Freeing long‐period prices from the uniform profit rate hypothesis: A general model of long‐period positions

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  • Antonio D’Agata

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.

Suggested Citation

  • Antonio D’Agata, 2018. "Freeing long‐period prices from the uniform profit rate hypothesis: A general model of long‐period positions," Metroeconomica, Wiley Blackwell, vol. 69(4), pages 847-861, November.
  • Handle: RePEc:bla:metroe:v:69:y:2018:i:4:p:847-861
    DOI: 10.1111/meca.12221
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    File URL: https://doi.org/10.1111/meca.12221
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    1. Peter Flaschel & Reiner Franke & Roberto Veneziani, 2012. "The Measurement of Prices of Production: An Alternative Approach," Review of Political Economy, Taylor & Francis Journals, vol. 24(3), pages 417-435, July.
    2. Harris, Donald J, 1988. "On the Classical Theory of Competition," Cambridge Journal of Economics, Oxford University Press, vol. 12(1), pages 139-167, March.
    3. Saverio M. Fratini & Alessia Naccarato, 2016. "The Gravitation of Market Prices as A Stochastic Process," Metroeconomica, Wiley Blackwell, vol. 67(4), pages 698-716, November.
    4. Schefold, Bertram, 1985. "Cambridge Price Theory: Special Model or General Theory of Value?," American Economic Review, American Economic Association, vol. 75(2), pages 140-145, May.
    5. Levine, David P, 1980. "Aspects of the Classical Theory of Markets," Australian Economic Papers, Wiley Blackwell, vol. 19(34), pages 1-15, June.
    6. James Moore, 2005. "Walrasian versus quasi-competitive equilibrium and the core of a production economy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(2), pages 345-359, August.
    7. David Andrews, 2015. "Natural price and the long run: Alfred Marshall’s misreading of Adam Smith," Cambridge Journal of Economics, Oxford University Press, vol. 39(1), pages 265-279.
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