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Gravitation of Market Prices towards Normal Prices: Some New Results

Author

Listed:
  • Bellino, Enrico

    () (Catholic University of the Sacred Heart)

  • Serrano, Franklin

    () (Federal University of Rio de Janeiro)

Abstract

The gravitation process of market prices towards production prices is here presented by means of an analyti-cal 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 pe-riod the level of the market price of a commodity will be higher (lower) than its production price if the quanti-ty brought to the market falls short (exceeds) the level of effectual demand. This approach also simplifies the results with respect to those obtained in cross-dual literature. Three versions of the model are here proposed: 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

  • Bellino, Enrico & Serrano, Franklin, 2017. "Gravitation of Market Prices towards Normal Prices: Some New Results," Centro Sraffa Working Papers CSWP25, Centro di Ricerche e Documentazione "Piero Sraffa".
  • Handle: RePEc:ris:sraffa:0025
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    File URL: http://www.centrosraffa.org/public/392585bb-e26f-4a56-8972-554b96f70d17.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Boggio, Luciano, 1992. "Production Prices and Dynamic Stability: Results and Open Questions," The Manchester School of Economic & Social Studies, University of Manchester, vol. 60(3), pages 264-294, September.
    3. Steedman, Ian, 1984. "Natural Prices, Differential Profit Rates and the Classical Competitive Process," The Manchester School of Economic & Social Studies, University of Manchester, vol. 52(2), pages 123-140, June.
    4. Enrico Bellino, 1997. "Full-cost pricing in the classical competitive process: A model of convergence to long-run equilibrium," Journal of Economics, Springer, vol. 65(1), pages 41-54, February.
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    More about this item

    Keywords

    Market prices; normal prices; Classical competition; gravitation; effectual demand;

    JEL classification:

    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • D20 - Microeconomics - - Production and Organizations - - - General
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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