Full text: Comment on Prof. Pivetti's paper

But can these equilibrium wtee be used to draw conclusions 
about a process of adjustment? In actual fact there is 
a jumble of capital assets from different periods with 
different techniques and different cost of output. 
If there is anything that empirical study can show it is 
the fact of vast differences in cost of production between 
different firms ( not temporary or accidental but systematic!). 
How can a calculation of normal cost uund uniform rate of 
profit be applied under such circumstances? In fact, 
there are all the time new techniques emerging, upsetting 
all chance of equilibrium being ever reached, and the various 
producers will be modest or ambitious in their profit 
requirements according to their circumstances. Surely 
Schumpeter was just a little nearer to the truth when 
he related profits to these dynamic considerations? 
Prof.Pivetti has carefully analysed the dilemma 
whichpight arise if we assumed an automatic adjustment 
of profit rate to interest: This would preclude any effect 
of interest changes on investment. His solution: Short run 
changes in interest will affect investment, but once they 
are regarded as permanent the price adjustment occurs and 
there can be no further effect on quantities. 
The necessary condition for this "price effect" is competition: 
No impediments to free entry and mobility. Prof Pivetti 
is perfectly aware of the importance of this assumption 
(p.27) and he tries very hard to play6 down these 
disturbing elements.

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