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Gravitation Of Market Prices Towards Normal Prices: Some New Results

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  • ENRICO BELLINO
  • FRANKLIN SERRANO

Abstract

The gravitation process of market prices towards production prices is here presented by means of an analytical framework where the classical capital mobility principle is coupled with a determination of the deviation of market from normal (natural) prices which closely follows the description provided by Adam Smith: each period the level of the market price of a commodity will be higher (lower) than its production price if the quantity brought to the market falls short (exceeds) the level of effectual demand. This approach simplifies the results with respect to those obtained in cross-dual literature. At the same time, anchoring market prices to effectual demands and quantities brought to the markets requires a careful study of the dynamics of the ‘dimensions’ along with that of the ‘proportions’ of the system. Three different versions of the model are thus proposed, to study the gravitation process: (i) assuming a given level of aggregate employment; (ii) assuming a sort of Say’s law; (iii) and on the basis of an explicit adjustment of actual outputs to effectual demands. All these cases describe dynamics in which market prices can converge asymptotically towards production prices.

Suggested Citation

  • Enrico Bellino & Franklin Serrano, 2018. "Gravitation Of Market Prices Towards Normal Prices: Some New Results," Contributions to Political Economy, Oxford University Press, vol. 37(1), pages 25-64.
  • Handle: RePEc:oup:copoec:v:37:y:2018:i:1:p:25-64.
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    File URL: http://hdl.handle.net/10.1093/cpe/bzy011
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    Cited by:

    1. Tony Aspromourgos, 2019. "The Past and Future of Keynesian Economics: A Review Essay," History of Economics Review, Taylor & Francis Journals, vol. 72(1), pages 59-78, January.
    2. Emiliano Brancaccio, 2022. "A discussion with Vernon Smith on the Classics, Marx, and Sraffa," PSL Quarterly Review, Economia civile, vol. 75(303), pages 425-431.
    3. Rotta, Tomás N., 2021. "Effective Demand and Prices of Production: An Evolutionary Approach," Structural Change and Economic Dynamics, Elsevier, vol. 58(C), pages 90-105.
    4. Biao Huang, 2020. "Normal utilization rate in the Sraffa framework," Metroeconomica, Wiley Blackwell, vol. 71(4), pages 767-780, November.
    5. Tony Aspromourgos & Kenji Mori & Masashi Morioka & Arrigo Opocher & J. Barkley Rosser & Yoshinori Shiozawa & Kazuhisa Taniguchi & Heinz D. Kurz & Neri Salvadori, 2022. "Symposium on Yoshinori Shiozawa, Masashi Morioka and Kazuhisa Taniguchi (2019), Microfoundations of evolutionary economics, Tokyo: Springer Japan," Metroeconomica, Wiley Blackwell, vol. 73(1), pages 2-48, February.
    6. Hang Chen & Cong Lu & Yuewei Wang & Lidan An, 2024. "Competitiveness Evaluation and Cooperation Network Analysis of Tourist Attractions from the Perspective of Co-Opetition in the Yangtze River Delta (YRD)," Sustainability, MDPI, vol. 16(2), pages 1-20, January.

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