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The Gravitation of Market Prices as a Stochastic Process

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  • Saverio M. Fratini
  • Alessia Naccarato

Abstract

The theory of value has been based ever since Adam Smith on the idea that the market prices of commodities, those at which actual trade takes place, gravitate around a central position known as natural prices. This paper seeks to develop a statistical idea of the process in question and suggests in particular that market prices can be said to gravitate around natural prices if the probability of their means being very close to natural prices after t observations tends to 1 as t tends to infinity. A set of possible conditions leading to that result is also presented.

Suggested Citation

  • Saverio M. Fratini & Alessia Naccarato, 2014. "The Gravitation of Market Prices as a Stochastic Process," Departmental Working Papers of Economics - University 'Roma Tre' 0195, Department of Economics - University Roma Tre.
  • Handle: RePEc:rtr:wpaper:0195
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    References listed on IDEAS

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    1. Christian Lager, 1998. "On the Notion of the Rate of Profit," Review of Political Economy, Taylor & Francis Journals, vol. 10(4), pages 447-458.
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    4. Saverio M. Fratini & Enrico Sergio Levrero, 2011. "Sraffian indeterminacy: a critical discussion," Cambridge Journal of Economics, Oxford University Press, vol. 35(6), pages 1127-1149.
    5. Neri Salvadori & Rodolfo Signorino, 2013. "The Classical Notion of Competition Revisited," History of Political Economy, Duke University Press, vol. 45(1), pages 149-175, Spring.
    6. Garegnani, Pierangelo, 1984. "Value and Distribution in the Classical Economists and Marx," Oxford Economic Papers, Oxford University Press, vol. 36(2), pages 291-325, June.
    7. 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.
    8. Michel-Stéphane Dupertuis & Ajit Sinha, 2009. "A Sraffian critique of the classical notion of centre of gravitation," Cambridge Journal of Economics, Oxford University Press, vol. 33(6), pages 1065-1087, November.
    9. Alexander Shapiro & Jos Berge, 2002. "Statistical inference of minimum rank factor analysis," Psychometrika, Springer;The Psychometric Society, vol. 67(1), pages 79-94, March.
    10. Ragnar Frisch, 1936. "On the Notion of Equilibrium and Disequilibrium," Review of Economic Studies, Oxford University Press, vol. 3(2), pages 100-105.
    11. Sinha, Ajit & Dupertuis, Michel-Stéphane, 2009. "Sraffa's system: Equal rate of profits and the notion of center of gravitation," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 495-501, August.
    12. Tony Aspromourgos, 2007. "Adam Smith's Treatment of Market Prices and Their Relation to «Supply» and «Demand»," History of Economic Ideas, Fabrizio Serra Editore, Pisa - Roma, vol. 15(3), pages 27-57.
    13. Sergio Parrinello, 2016. "Causality and normal states in economics and other disciplines," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 23(1), pages 127-151, February.
    14. Ajit Sinha & Michel-Stéphane Dupertuis, 2009. "Sraffa's System: Equal Rate of Profits and the Notion of Centre of Gravitation," Post-Print hal-00683159, HAL.
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    Citations

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    Cited by:

    1. Ellis Scharfenaker & Gregor Semieniuk, 2017. "A Statistical Equilibrium Approach to the Distribution of Profit Rates," Metroeconomica, Wiley Blackwell, vol. 68(3), pages 465-499, July.
    2. 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.
    3. Stefano Zambelli, 2018. "Production of commodities by means of commodities and non‐uniform rates of profits," Metroeconomica, Wiley Blackwell, vol. 69(4), pages 791-819, November.
    4. Enrico Bellino & Christian Bidard & Saverio M. Fratini & G.C. Harcourt & Arrigo Opocher & Ian Steedman & Naoki Yoshihara & Heinz D. Kurz, 2017. "Symposium on Arrigo Opocher and Ian Steedman (," Metroeconomica, Wiley Blackwell, vol. 68(4), pages 586-624, November.
    5. Bellino, Enrico & Serrano, Franklin, 2017. "Gravitation of market prices towards normal prices: some new results," MPRA Paper 79297, University Library of Munich, Germany.
    6. 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".

    More about this item

    Keywords

    market price; natural price; gravitation; random variables; consistency;

    JEL classification:

    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D46 - Microeconomics - - Market Structure, Pricing, and Design - - - Value Theory

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