[OPE-L:2434] RE: accounting for value

From: P.J.Wells@open.ac.uk
Date: Mon Feb 28 2000 - 06:28:03 EST

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n reply to my remark that

> > This is odd, since there's reason to think that Marx's political economy
> > explains the rationality (for capital) of precisely the traditional
> methods
> > of *practical* accounting which orthodoxy derides (see, e.g., Bryer
> (1994)
        Jerry very reasonably commented [OPE-L:2411]:

> The traditional methods of practical accounting were developed for use by
> individual firms. Thus, they are relevant for the calculation of
> *individual value and profit*. Yet, these methods which focus on the
> balance sheets of an individual firm tell us little, if anything, about
> *social value and the transfer of value among capitalists*.
        Taken one at a time, this is clearly true -- all you see is (an
estimate of) the capital employed and the return to it. But taken together
-- into a macro account, as it were, of the whole corporate sector -- the
transfers ought in principle to show up.

> Thus, it
> would seem to me that these methods are of very limited use when we
> consider not an individual capitalist but individual branches of
> production and the economy as a whole (NB: to complicate matters still
> further, to calculate the transfer of value among capitalists we'd have
> to consider the international capitalist economy rather than an
> individual nation. Furthermore, we'd have to consider how foreign trade
> and individual states can impact the international transfer of value).
        Taking the last first, I agree that the international aspect is a
serious problem, not least because of transfer pricing and other
machinations of multi-national companies.

        On the main point of the foregoing, I am tempted to paraphrase
Margaret Thatcher, to the effect that "There is no such thing as a branch of
production, but only individual companies and their accounts."

        What all the empirical studies that I've seen do is take as given
the standard industrial classification system underlying whatever data set
they are using. This is fair enough in itself, but clearly a "branch of
production" is a mental construct whose particular instantiation may be more
or less appropriate to a given enquiry.

        Using company accounts data one can both check studies which use the
standard classification (which, incidentally, I gather the relevant
authorities in the US are spending a lot of effort on to revise on a more
systematic basis), and try out any alternative grouping which seems

        The foregoing, however, is rather off the point which Bryer's
article is concerned with. His point is that the rational investor, exactly
as orthodox financial theory suggests, will hold a portfolio which exactly
matches the profile of the entire corporate economy, and will therefore by
definition receive a return equal to the general rate of profit.

        Individual company accounts allow the rational investor to observe
how particular sets of capitalist managers are doing relative to both
capital as a whole and to rival managers in the same line of business, and
to take appropriate action (by holding back investment from the laggards).

        Bryer explicitly intends this as an answer to Steedman's claim that
the value rate of profit is unknown to capitalists and that there can
therefore be no force acting to equalise it between industries (Bryer, 1994,
p. 320).

> Some might employ the assumption that an individual firm is a
> "representative firm" within a branch of production. Yet, there is no way
> of accurately accessing how "representative" a firm is unless we have the
> data on the other firms in that branch
        Exactly so -- but complete sets of company accounts data (at least
in the UK, and for some other European economies) are readily available in
electronic form. Hence, no assumption about representative firms are

> and, it should be noted, that firms
> generally keep a lot of their accounting information proprietary (i.e.
> secret).
        Clearly it would be nice to see to the "real" books -- but if one
accepts Bryer's reasoning, one would expect there to be significant forces
acting to enforce the production of broadly accurate and comparable
accounts, as there in fact are (e.g. legal requirements, and the activities
of bodies concerned with both technical accounting standards and
professional conduct).

        Also, while it's true that company-level results are in a sense
averages of the results of many different activities, this hardly
constitutes a justification for preferring the usual type of study using
sectoral data, which are just higher-level averages.

> Moreover, the very construction of the "representative firm"
> artifice would seem to obscure the transfer of value among capitalists
> (and other classes).
> Thus when we move away from the level of an individual firm to the macro
> level, what can the traditional methods of accounting still tell us?
        The point about Farjoun & Machover's statistical approach is
precisely that it links -- better, incorporates -- both the micro and macro
levels. The distribution function of (for example) the rate of profit is a
property of the whole, but conveys information about the parts.

        All these points are made rather briefly -- looking forward to
further discussion


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