/
2
r©l£i"bioris
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
ft
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.