Sorry But the South Bank Skatepark Village Green Application Will Fail
Its a simple issue, and nothing to do with whether land is a ‘green’ or not which forms no part of the law or precedent. Rather the Growth and Infrastructure Act rejected introduction of a ‘character test’ but still prevents registration where land has been allocated for development by the local authority as part of a Local or Neighborhood Plan. The South Bank Centre has been allocated for mixed use development for many years in a development plan, I know I wrote the policy. Any application will be a waste of time and money for all involved.
The Lambeth UDP allows unrelated enabling development to be built in the South Bank Centre, provided that it is essential to the development and/or retention of arts and cultural facilities; that it would not undermine the character of the South Bank Centre as an arts and cultural quarter; and that the proceeds of any such development are applied exclusively to support and enhance the South Bank Arts and Cultural Centre. This is just what is proposed, a replacement facility is proposed 120 metres away.
This is carried forward in the draft Lambeth Local Plan 2013 now out to consultation.
Whats so special about East Hampshire – PD Exemptions no better than throwing pins at a map?
The list of exempted local planning authority areas from the office to resi pd right.
Bizarre, many parishes in East Hampshire, some individual buildings ion Sevenoaks, and with a few odds and sods other than the Central Activities zone and K &CD (but bizarrely no other outer London areas) no where else makes the cut. Why6 should a single office remain in Wandsworth, Richmond or Kingstone for example. Crying out for a JR as I cant see any ryme or reason for it.
The Cost (that is Price) of Speculation – Going Beyond The Minsky ‘Ponzi’ Model
How do you make speculation endogenous to economic theory?
Further how do you make the full suite of potential profit making activities, speculation, hedging, arbitrage and investment endogenous?
By endogenous I mean a variable that is determined alongside other variables rather than outside the economic model.
The reasoning in this post comes was prompted in part from speculation by Steve Keen on to what extent the speculative drive is a necessary component of capitalism even though it is destabilising, partly from some dissatisfaction with the Minsky ‘Ponzi’ model of asset speculation, which has been too easily dismissed by neoclassicals as somehow individuals not behaving ‘rationally’. The model here is a generalisation of our earlier model of default risk in banking and insurance across all sectors.
In this model income not consumed – in the Keynesian vocabulary ‘saved’ – is split into a Tobinesque portfolio of investment, arbitrage, hedging or speculation. What about money held in bank balances? This is treated as speculation in that it is holding an asset, in this case money or near money, with some speculation about the retention of the purchasing power of money during the period with which it is held liquid. So then a portfolio is held with assets of varying degrees of liquidity, risk and expected return.
Imagine in an initial model perfect price information. Here arbitrage cannot exist so it simplifies to three variables.
Imagine a further wholly unrealistic simplification (which we will reject) that all expectations about future prices are correct. Here no profits can be made from speculation as all investment decisions will be made at correctly anticipated prices. Here there will be no risk premium on venture capital or corporate debt – and equity prices will instantly price in the results of successful investment. In such a world there would be alpha but no beta, or in more classical terms average profits but no excess profits. This shows the intimate relationship between speculation and investment. Once a financial asset is created by investment (whether debt or equity) that asset can be traded and speculated against. The initial investment provided financing the subsequent speculation does not, however if the price expectations of speculators raise prices of the financial asset it provide additional scope for financing of the investment term, either through raising new equity, extending loans (as the risks on the original loans are lowered) or through increased collateral (owners equity) allowing greater debt financing or investment through retained earnings.
An investment decision is a prediction of returns over period. Speculation involves estimations of whether there will excess profits or losses using knowable risks. Hedging is adopting the opposite position. So investment is a three way vector where any point on a future yield curve is the sum of the speculation vector (return x probability of return) and the hedge vector (loss X (1- probability of return)). Speculation and hedging being a zero sum game, they help prices of assets adjust to real prices but do not directly add to wealth, their effect is indirect.
Prior to Neidhoffer’s ‘The Speculator as Hero’ the tendency was to see speculation as entirely negative:
Let’s consider some of the principles that explain the causes of shortages and surpluses and the role of speculators. When a harvest is too small to satisfy consumption at its normal rate, speculators come in, hoping to profit from the scarcity by buying. Their purchases raise the price, thereby checking consumption so that the smaller supply will last longer. Producers encouraged by the high price further lessen the shortage by growing or importing to reduce the shortage. On the other side, when the price is higher than the speculators think the facts warrant, they sell. This reduces prices, encouraging consumption and exports and helping to reduce the surplus.
Neidhoffer shows is the amorality, rather than the immorality, of capitalism in this regard, much like the much misunderstood Machiavelli shows us the logic of political power. Speculation is an inevitable component of the price adjustment process when production or prices are not to expectations. This of course is not to say it is moral or the best means of allocating scarce resources (as for example when people might die before a new crop is grown or imports arrive).
Let us extend the unrealistic assumptions slightly by assuming that market agents do not know future prices but are able to successfully predict future risks, that is the probabilities of certain prices. This commits the ergodic fallacy, but lets test this expanded model for a moment. Here there is a role for speculation and hedging, indeed the prices of options, the prices of both can be calculated exactly. Here there is beta, but is simply impossible to know whether you will gain it, but you can adjust a portfolio to remove all downside risk by hedging, so you can guarantee alpha. Speculation and hedging are again a zero sum game.
How are prices different in this model from those in a world with no speculation and hedging? Speculation has a cost, it has a price, the cost is the cost of the hedge. This adds to the cost base of the firm and the price of goods (or the price of money if the commodity demanded is a loan). It shifts the supply curve upwards reducing the consumer surplus and increasing the producer surplus. This is not a disequilibriating facto, rather it defines a new pareto optimum position as the seller will not sell and the buyer will not buy without hedging risks. It defines the proper equilibrium position. As an additional risk it has an additional cost requiring additional financing, either through saving or newly issued debt.
In a final step towards realism lets introduce Keyne’s radical uncertainty, uncertainty rather than risk, what is unknown and unquantifiable about the future. Of course none ergodicity means that the future can never be like the past, all we have is evidence from past events about what the future is likely to be like. So lets assume we have a property, or any other type of asset bubble, but no one knows if it will pop this year or next or next decade, the evidence of history simply suggesting that prices of the asset will rise in the short term and collapse in the long term. If a bubble seems likely to pop it is rational therefore to increase estimation of risk and not to cease all altogether speculative investments but to adjust your portfolio and increase your hedging./ If you cease speculative investment altogether, unless your are preciant in your forecasting, you could lose altogether what alpha exists in the short run. With increasing risk, even if not wholly quantifiable there must be increased hedging and increased cost of hedging. In a market where asset prices continue to rise it is irrational to wait and undertake crusoe like savings – you lose out on a rising market, so demand for borrowing increases to finance the hedge costs. But that demand will push interest prices (the cost or money) up as banks or other lenders, now at the top of the market at maximum leverage of deposits must attract additional equity or loan funding (either forced by the market assessment of defulat risk or statutory deposit requirements if they exist). With interest rates rising the bubble may pop as the over leveraged default and credit dries up.
Note the key fact about this story. Note there is no irrational behaviour, it does not rely on Ponzi or speculative borrowers to use Minsky’s terms behaving irrationality, indeed all participants wisely hedge risks as much as they can given an uncertain future, and the more they wisely hedge the nearer the systemic crisis approaches. We are in the world of 2007 where despite massive hedging and covering of collateral financial collapse was not averted – indeed in the model presented here it is bright closer.
In this model there is no intermediation between the risk averse and the risk bearing, as with banking intermediation is not a function but an exposte rationalisation of net portfolio decisions. Some by the size and nature of their portfolios can afford to be greater risk takers than others but in this model all will rationally hedge these risks. In this model finance is from endogenous money and interest rates driven by demand and supply of liquid financing.
Seen from the perspective of the individual speculative or Ponzi financier their behaviour may bring thir own state of bankruptcy closer but not necessarily the state of breakdown closer, indeed in normal times bankruptcy is a good thing. Rather in the model presented here it is normal and well hedged financing which brings the breakdown closer regardless of the irrational behaviour of individuals, indeed the more ‘rational’ they are the quicker the breakdown comes. The instability fo capitalism comes not from foolishness it is endogenous.
Send in the Clowns – What if UKIP actually Ran Planning Policy? #NPPF
Yesterday’s local elections, being primarily at county level, will change few areas if any in terms of balance of power. UKIP still dont empty a single dutbin, or publish a single local plan. Next year could be different.
But looking at the UKIP local elections manifesto what if they did control an LPA, or even national planning policy.
The manifesto weighs in against saloon bar topics, anti-wind, pro-green belt, pro-localism, equally important it proposes local referenda on controversial issues like local planning and a no whipping rule for local cllrs.
Consider first the prospect of local control by UKIP of a plan making authority. The likelihood of local referenda would make it unlikely that any authority would vote for significant green field release as many of those moving into new homes would be from outside the LPA, even if they lived in the same housing market area. Many of those wishing for form a household or even to downsize to smaller accommodation would not get a vote. Unsoundness, pah, the UKIP policy would be deliberate confrontationalism The prospect of losing appeals, the ‘stick’ the NPPF is based on, would not work. The theory behind open source planning was a basic respect for the rule of law in conservative middle england, but that respect has been breaking down across the neo-liberal world, witness the rise of the Tea Party and how many conservative MPS would flout eh european convention on human rights. Loyalty to the politics of place, the politics of blood and soil, are trumping the loyalty to rule of law. So we would be likely to see in such a UKIP ruled local world a deliberate flouting of the seeking of sound plans and a collapse in housing numbers. It would be the politics of the aged with homes and with mortgages paid off protecting their equity against all assaults by the young that don’t own their own homes. Indeed just as the modern conservative party was seen by Peel as an alliance of the landed and business classes under Cameron and Farage these have split into separate parties each representating their own class, business and house owners. Neo-cons and paleo-cons.
Undoubtedly in such a world housebuilding would collapse as it would be difficult to get any large scheme through a referenda, brownfield sites would be just as controversial so we would see a rise in house prices which would only see the rise in resistance of the houseowning classes to more housebuilding, as they cash in. Nor would we see increased redevelopment of existing plot or higher densities. The risks of another property bubble would be very high.
Cheshire East Leader Rules Himself Out from Voting on Local Plan After Ill Judged Letter
Cheshire East is having to extend its local plan consultation to allow for consideration of ommission sites.
In an incredibly ill judged letter to the Crewe Chronicle the leader of the Council has made it clear whatever the results of the consultation, and whatever the results of the final environmental report (SEA) which of course cannot conclude until that consultation has completed he says:
“I, as leader of the council, am personally shocked at the number of sites from Wistaston in Crewe, to Sandbach and Wychwood Park, and I state that I want the people of these areas that are being consulted to come and speak out. I want petitions, which cumulatively, we could use to force a parliamentary debate. Make no doubt, Cheshire East stands strongly against these unwanted, unsustainable development.”
He could not more clearly state he is only interested in objections, not representations in support, he has made his mind up and is not open to arguments. This is predetermination. The Localism Act does not change this, all it does is allow cllrs to express a prior view not to close their minds to all arguments. At the final decision on submission they must still look at all evidence and all submissions with a fresh mind. The change in the law allows a prior opinion not to be treated as predetermination, but this is not a prior opinion, it is a statement of a course of future action and future decision.
The administrative law principal of predetermination has not been abolished by the Localism Act, merely clarified.
Section of the Localism Act 2011 provides:
“A decision-maker is not to be taken to have had, or to have appeared to have had, a closed mind when making the decision just because:
(a) the decision-maker had previously done anything that directly or indirectly indicated what view the decision-maker took, or
would or might take, in relation to a matter, and
(b) the matter was relevant to the decision.”
So having a ‘closed’ mind is still illegal (otherwise it would not include the phrase ‘just because), and stating opposition to a proposal is not, but here the leader has bound the whole authority without even having read the results of the consultation!
Undoubtedly the leader if he votes on submission will face legal challenge now and has landed his authority in costly and unnecessary legal action. He should resign.
Gleeson Challenges Rigour of Malmesbury Neighbourhood Plan
House builder Gleeson has submitted a 23-page response to the Malmesbury Neighbourhood Plan consultation setting out the reasons why it believes the plan is flawed and unlikely to be found sound by an independent planning inspector.
The response says that the draft plan is not supported by a robust evidence base.
Among the details contained in the plan that Gleeson questions is Wiltshire Council’s assertion that Malmesbury has a significant employment base, resulting in the highest level of in-commuting of all of the market towns in Wiltshire.
Gleeson states: “There is a significant imbalance between jobs and houses which the Neighbourhood Plan should address in order to reduce the need to travel, provide more sustainable housing and sustain economic growth.”
The Sustainability Appraisal which supports the Neighbourhood Planning Process is heavily criticised in Gleeson’s response, concluding this work needs to be undertaken correctly in order to identify the sites which are most sustainable for development and for the plan to be found sound.
Some of the issues Gleeson highlights in relation to this document include proximity to flood zones and the impact on the setting of the AONB.
Gleeson’s response also raises concerns about the 85-metre contour which the plan uses to dismiss sites.
Scott Chamberlin from Gleeson said:”It is our professional opinion that the plan is flawed and as a result there has been a lot of time and expenditure into a plan which runs a serious risk of being found unsound and sent back to the drawing board by an independent inspector.
North Warwickshire – Early Review Inappropriate if does Not Meet Objective Need
The key thing to note is is highlighted. With RSS now withdrawn it is unlikely that LPAs can now bet on an early review – as the interim Dacorum finding.
Dear Mrs Barratt,
Thank you for your letter of 28 March. As you know the date for the preliminary
session to consider whether the Council has met the duty to co-operate has been set
for 5 June. I will, through Amanda Willis, provide an agenda for that meeting shortly
but my response (below) to the matters raised in your letter of 28 March raises
questions regarding whether the Core Strategy should be withdrawn.
As I said in my letter of 22 March, the National Planning Policy Framework (NPPF)
requires evidence to be adequate and up to date. Whilst the 2008 Strategic Housing
Market Assessment (SHMA) may well be proportionate in terms of its breadth and
depth (taking into account the circumstances at the time it was produced), due to its
age, it cannot be said to be up to date. The passage of time has a bearing on how
reliable data is and the robustness of the projections, studies and assessments using
that data. The NPPF requires local planning authorities to have a clear understanding
of housing needs in their area. In addition to the passage of time, the economy and
the housing market has changed significantly since the SHMA was prepared and I do
not consider that it provides an adequate basis on which to objectively assess the
housing needs of the Borough.
I note that the joint SHMA that you are about to commission includes Warwick
District Council. Warwick District Council were not party to the 2008 SHMA and the
inclusion of this authority would appear to indicate an acknowledgment that
circumstances have changed and cast further doubt on the adequacy of the 2008 study.
I am pleased to see that you are working with some of your neighbours to prepare a
new joint SHMA but I am concerned regarding the timetable for this work. The Stage
1 Joint SHMA is not due for presentation until January 2014. I note that this exercise
will determine overall housing numbers after which you intend to undertake a Stage 2
SHMA with Nuneaton and Bedworth and Rugby Borough Councils. No timetable
has been set for this work.I am not aware of the circumstances of that led to my colleague’s interim conclusions
with regard to the Solihull Local Plan. For the reasons given above, I do not see how
I could conclude that the Core Strategy is based on a strategy which seeks to meet the
objectively assessed needs of an area. A plan which cannot be shown to be seeking to
meet the objectively assessed needs of an area cannot be sound and, consequently, I
do not consider that it would be appropriate to defer housing matters to an early
review of the Core Strategy.
The updated SHMA may show that the Core Strategy meets the needs of the Borough
and it may not, leading to a need to revise the plan. Further, there is no indication of
when this assessment will be completed. The Planning Inspectorate’s Procedure
Guidance cautions against suspensions of longer than 6 months. January 2014 is eight
months away and that would only take us to the completion of the Stage 1 assessment
and there is no indication of when the Stage 2 SHMA would be produced. An open
ended suspension is not acceptable, particularly where the results of such a critical
study may require significant revisions to the Core Strategy. In light of this, I would
urge you to consider the withdrawal of the Core Strategy.
I note that you anticipate that updating the Employment Land Study would take
around 4 months. Should you decide to proceed, would you seek a suspension to
enable this work to be done? I note that you do not intend to update either the
Strategic Housing Land Availability Assessment or the Strategic Flood Risk
Assessment. Should the examination proceed, we will explore whether there is
sufficient available land in the broad locations identified by the Core Strategy to meet
the needs of the Borough.
Turning to retail, should we proceed, you may wish to consider whether the evidence
base shows that the Core Strategy is based on a clear understanding of business needs,
the function and roles of the town centres in the Borough and that it provides an
adequate strategic framework to meet your stated aim of ‘helping existing businesses
with the high streets’.
I would now ask you to give careful consideration to the next steps for the Core
Strategy and to advise me of the chosen path at the earliest opportunity. I do not
propose to hold an Exploratory Meeting but am happy to do so should it be
considered to be useful to assist the consideration of procedural issues. I will do all I
can to help the Council in relation to the way forward, although you will appreciate
the restricted nature of my role in this regard and that any advice given is without
prejudice.
Yours faithfully
A Thickett
Inspector
Ultimate Neo-liberal Extension – Buy Policies Off the Shelf from Right Wing Dumb Tanks
A series of leaked emails between key figures in Ukip reveals growing chaos at the heart of the party as it struggles to fill a policy vacuum just days before crucial local elections in which it is expected to make spectacular advances.
In one email, a senior party figure claims that leading the anti-EU party is like “herding cats”. Ukip leader Nigel Farage is warned that his party is facing a decade without credible policies, as crippling internal rows rage, and it is suggested that the party should consider buying off-the-shelf strategy from right-leaning thinktanks.
Senior members must “get off their hobby-horses” if the party is to develop policies, Farage is told in the bombshell emails from Stuart Wheeler, the party’s treasurer, and Godfrey Bloom, a leading Ukip MEP.
A despairing Bloom, writing last Thursday, warns: “My experience thus far is that as soon as more than two people get in a room progress completely stops. Even where we have experts of our own, they disagree.” Bloom suggests the party should now consider buying policy “off the shelf” from thinktanks to lend it some credibility rather than attempting to “reinvent the wheel” by devising party positions on the major issues of the day.
Wheeler, a former Tory donor who gave £5.5m to the Conservatives in 2001 before being expelled for also donating to Ukip, responds: “I could not agree more strongly that some people will have to get off their hobby-horses.”
Details of the party’s internal crisis are revealed today as Ukip prepares to field an unprecedented 1,217 candidates in Thursday’s local elections. The party is unlikely to return large numbers of councillors but Downing Street fears it will deprive the Tories of victory in many seats and be the cause of major trouble for David Cameron’s leadership.
Along with its strong anti-European Union message and calls for a hardline on immigration, Ukip is campaigning heavily on issues likely to appeal to wavering Tories, including opposition to green belt development, wind farms and a second high-speed rail line. However, the party’s manifesto is vague on details as it attempts to appeal to the broadest audience, including disaffected Labour and Liberal Democrat voters.
The emails leaked to the Observer illustrate how powerless the party is to build a manifesto as it attempts to please its politically divergent support. Bloom says the party’s policies are “naturally coming under more scrutiny” as it grows, but warns Farage of the inability of members to agree on policy lines.
Bloom, who also complains that whatever the party says on tax and the economy will “be sneered at or decried”, writes: “The charm and frustration of Ukip is we have doctors who fancy themselves as tax experts, painters and decorators who know all about strategic defence issues and … retired dentists who understand the most intricate political solutions for the nation.
“Our website will have no policies at all on there for 10 years if we adopt a neo-Byzantine approach to formulating them. This means some quite senior members are going to have to stable their hobby-horses.”
The former financial economist also reveals a split between the old stalwarts of the party, formed in 1993 in response to the Maastricht treaty, and the new members who he fears are introducing “political correctness” among other “main party baggage”. Ukip is said to be picking up 1,000 extra members a month, with membership now exceeding 25,500. Bloom writes: “Having worked on the defence paper for over one year it would appear Ukip has more military and naval experts than we have soldiers. Most of them do not agree with each other. It is like herding cats. We are also attracting new members who bring main party ‘baggage’. Focus groups, quotas, even political correctness.
“We must be wary of listening to these siren voices. We did not get where we are today by following, but leading.”
Bloom claims that he has been in talks with two free-market thinktanks, the Institute of Economic Affairs, and Civitas, whose policies he suggests “buying off the shelf where it is close to our own small government, low tax, libertarian position”.
The Ukip MEP, who admits in the emails that his party “do not have the resources to write serious papers on major subjects”, adds: “If Nigel, or indeed any of the ‘frontbench’ spokesmen talk of welfare or tax, the endorsement of such institutions is a very strong shield from the sort of dismissive left wing interviewers with whom we usually cross swords.
“Imagine Nigel in a hostile (oh yes it will be) interview with a ‘Paxman’, being able to say “Yes it will work, our policy has been completely vetted and endorsed by……..” fill in the blank, Civitas, IEA, IOD, BMA, RCN etc…”
Wheeler, who reportedly made a £90m fortune in investment banking, writes that he agrees with “a great deal” of Bloom’s points, but adds that the party’s “policies must be Ukip’s policies”. He adds: “Obviously we cannot just say, when asked about what our policies are, that we agree with the IEA on X, Y and Z, and agree with Civitas on A, B and C, and some other thinktank on others etc.”
A spokesman for the party said: “What you are seeing is discussions about policy development. Mr Bloom would like to get things done rapidly, Mr Wheeler would like to ensure that consensus is reached.
“It merely displays creative tension that in the end will produce a far better policy platform than we might have otherwise without due discussion.”
The Classical Error in Interpreting Torren’s Theory of Value
Torren’s theory of value was that prices in the long run’ were regulated by the cost of capital advanced (equivalent to indirect (accululated) labour) for equal turrnover periods of capital, and not by cost of indirect + direct labour.
As he put it
“From the perpetually operating law of competition, the employment of equal capitals for equal times yields results of equal exchangeable value” (EICT 1820, 361)
The ‘results’ here being the price of the products produced plus the price of the capital reproduced (Torrens joint production method adopted by Sraffa) allowing for depreciation.
This theory caused some concern amongst classical economist, whilst accepting part of its validity the general view adopted by McCulloch and James Mill was that it was functionally equivalent to rather than a challenge to Ricardo’s theory(see O’Brien The Classical Economists reinterpreted Page 109), a position often repeated in current history books on classical economics. This is an error, as is the view set out below:
Kurtz and Salvatori Interpreting Classical Economics – Studies in Long Period Analysis Page 142.
Torrens adopted the special assumption…that in the same lines of production the same capital input proportions apply…hence the capitals advanced in different industries can easily be compared….It is clear that under the conditions specified Torren’s capital theory value and Ricardo’s labour theory value amount to the same thing.
This is an error as it it based on the original theory Torrens advanced in the 1819 first edition of his Corn trade where the capital input proportions of the sectors exchanging were the same. But following the critiques of Ricardo, Mill and McCullough Torrens made major changes to the 1821 and 1826 editions.
In the later edition Torrens adopted no less than 24 different models. (see Torrens and Malthus’ Challenge Rogério Arthmar Researcher of the Brazili Paper to be presented at the History of Economic Thought Society of Australia 2012 Conference, Melbourne) In some of these capital input proportions were identical in others they were proportionate. So for example in a two industry model if a capital intensive industry exchanged with a labour intensive industry the capital intensity of one sector was necessarily the inverse of another. The issue is whether in an n industry model this holds – i.e whether the capital industry of each industry when added necessarily adds to unity. Was Torrens distorting his models to make a special case seem general or was he rather advocating a deeper underlying principle that has been missed/forgotten, much like his Corn Model (which we shant forget Ricardo took from Torrens) as an underpinning structural and universal principle underlying the surplus approach.
It is I think highly unlikley Torrens willfully distorted his models to present a special case as more general, rather he was setting out a more general principle, a theory set out at length in his 1821 Essay on the Production of Wealth. This theory of ‘effectual demand’ is that at long run prices not dictated by monopoly prices the effectual demand of each and every commodity in the economy will be set by the requirements for use by each and every other sector. At that prices effectual demand = effectual supply. This was a modified form of Says Law/The Law of Markets – but Torrens was critical of the form of the law put forward by Say and Mill.
M. Say and Mr. Mill belong the merit of having been the first to bring forward the very important doctrine, that as commodities are purchased with commodities, one half will furnish a market for the other half, and increased production will be the occasion of increased demand, (page ix)
Which to my mind is a clearer explanation then either Say or Mill.
But this doctrine, though it embraces the very key-stone of economical science, is not correct in the general and unqualified sense in which these distinguished writers have stated it. Though one half of our commodities should be of the same value as the other half, and though the two halves should freely exchange against each other, it is yet possible that there may be an effectual demand for neither.
Effectual demand being the term from Adam Smith used here in the revised formulation of Ricardo to express the demand that results when commodities are sold at their ‘natural price’ around which (plus the ‘customery rate of profit’ the classical gravitation process oscillates).(see page 53 of the pamphlet)
It is quite obvious that there can exist no reciprocal effectual demand, unless the interchange of two different sets of commodities replaces, with a surplus, the expenditure incurred in the production of both. Now, what is that specific relation or proportion between commodities, which occasions the exchange of one half of them against the other half, to replace, with a surplus, the cost of producing both ?
It is clear in the final chapter of the essay that Torren’s solution is to set out such a n-sectors system where the proportions are reciprocal and add to unity. Torrens may have been the first to describe this as ‘Equilibrium’, but Torrens was clear that most of the time the economy was not in equilibrium and it was the classical gravitation process that created the pressures for equilibriation.
Accepting the principle of compatible capital proportions it is clear that Torren’s system does not only apply to a special case but is the general case in equilibrium, with incompatible capital proportions creating shortages in effectual demand driving away from equilibrium and the reallocation of capital top the most profitable sectors driving prices back towards it. Under these gneral conditions Torren’s theory of value is not the same as Ricardos. In Torren’s system prices (including wages and the price of money) and profits were determined simultaneously, a point misunderstood by both Ricardo and Marx (both suffering from the Ricardian Vice) that there must be some apriori cuase of capital values. In Torrens there is no apriori exogenous elements other than the techincal productivity of production.
Is then Torren’s system free from error and does it represent a modified and corrected labour theory of value. I shall leave the second question open however one issue Torrens was unclear about was the need to discount the costs of inputs, both direct and indirect. On this point George Scope writing in 1833 set out a corrected theory (in many ways he has the highpoint of the english school of political economy) where it is the time discounted costs of production that determine value,
