# [OPE-L:2988] Re: Re: Need 3

From: Ajit Sinha (ajitsinha@lbsnaa.ernet.in)
Date: Wed May 03 2000 - 03:25:59 EDT

C. J. Arthur wrote:

> Since neither fred nor anyone else has replied to Andrew's 'Need 3' I take
> the liberty of doing so even tho' I am sorry to say I have not closely
> followed their debate.
> >
> >////////////////////////////////////////////////////////////////////////
> >
> >Table 1
> >========================================================================
> > Constant Cap.
> > Input Total ============= Vbl. Output Rate of
> >Yr Price Cap. Seed Other Cap. Output Profit Price Profit
> >
> >1 £2/q 60 q 20 q 20 q 20 q 100 q 40 q £2/qr 66.7%
> > £120 £40 £40 £40 £200 £80 66.7%
> >
> >2 £2/q 60 q 20 q 20 q 20 q 200 q 140 q £1/qr 233.3%
> > £120 £40 £40 £40 £200 £80 66.7%
> >
> >\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\

_____________________

Chris, I have just come back on ope-l after a long time, so don't know the context
of this. But in anycase, certain points are clear cut in the above example.

First of all, it is not clear what does the category "other capital" stands for.
If it is other than corn, the physical rates of profits in the above table are
mathematical nonsense. The ratio of surplus corn to physical capital would be a
ratio of heterogenous collection of goods.

Thus the only meaning one can make of the above table is that it is a case of
one-commodity model. Now, in a one commodity model "money" is theoretically
redundant. So the equations in terms of money turns out to be meaningless.

For the sake of argument, let us assume that it is a multi-commodity model poorely
represented in physical terms as "q" for all kinds of things and units. Now, in
multi-commodity case the rate of profits could be determined independently of
prices only if we could first work out the Standard commodities for the two
systems and secondly the wages are represented in terms of the respective Standard
commodities. Thus the physical rates of profits in the above example are still
nonsensical concepts.

Furthermore, we need to know whether the pound sterlings stand for one pound of
silver-commodity produced in the system or for fiat or credit-money. Let us
suppose they stand for a pound of silver-commodity (as was the case with Marx). In
this case, with the magical change in technology, all the prices (in terms of
silver-commodity) will change. And one cannot a priori even say whether the price
of corn will rise or fall let alone what would be the magnitude of this change.
One needs to work out the whole set of simultaneous equations to know that.

Let us suppose the pound sterlings stand for fiat or credit money. Then one will
need to know how the relationship of one unit of money is established with one
unit of various different commodities. Without that I don't understand what role
it can play in a theory of prices.

Let us assume that we are not in the business of 'theory of prices' and are in
some kind of New Interpretation world of National Income Accounting only. Well,
even in this case, one will need to know how come the 'value of money' remains
constant between the two cases? You should keep in mind that the 'value of money'
must be kept constant if you want to carry the same value from one period to
another for the constant capital used.

The last scenario could be that the case in the example above is about an
unusually good harvest in one year due to some accidental reason. In this case, it
is not supposed to represent a change in technology but rather just an accidental
increase in total market supply of corn for just a year. In this case, we are
simply dealing with demand-supply adjustments in the market. In this case
production equations have no relevance. The prices will be determined by the
higling in the market depending on various factors not presented in the equations.

Hope it was helpful. Cheers, ajit

> >
> >
> >Marx considers a farmer who produces corn by means of seed corn and other
> >inputs. All costs are measured in terms of both money and corn. Marx
> >assumes that, although "work was carried on in the same conditions" in
> >both years, using "the same amount of labour," the output of year 2 is
> >double that of year 1. The total value of this output, however, does not
> >increase. "Since the 200 qrs [produced in year 2] are the product of the
> >same amount of labour [as in year 1], then once again they are likewise =
> >only £200. Thus, only £80 profit remains, which is now, however, = 140
> >qrs" (Marx 1991:267). Marx thus suggests that, contrary to Ramsay's
> >claim, the rise in productivity causes neither profit nor the rate of
> >profit to rise in year 2.
> >
> >These conclusions are incompatible with the interpretation that the value
> >transferred is determined by the input's replacement cost. Had Marx
> >computed the value transferred from the seed corn in year 2 at £1/qr,
> >profit would have exceeded £80. Used-up constant capital would have
> >constituted a smaller share of the output's total value of £200, and thus
> >surplus-value or profit would have constituted a larger share, even if
> >variable capital is assumed not to change. Marx's conclusion that profit
> >remains £80, despite the rise in the physical surplus from 40 qrs to 140
> >qrs, is valid only if the value transferred from the seed corn is
> >determined by its pre-production value of £2/qr.
> >
> >
> In answer to the above gloss on Marx on Ramsay:
> a) I do not agree that the reproduction value at the beginning of year 2 is
> £1/qr. It is unchanged at £2. This is because the new technique has not yet
> been applied. It is just a glint in the farmers' eye. Only at the end of
> year 2 is the new snlt *socially validated*. Thus only at the start of year
> 3 is unit reproduction value £1 and the seed corn remaining from the end of
> year 1 suffers moral depreciation accordingly.
> b) An interesting contingency is this: suppose the new technique is applied
> first in the Southern hemisphere and transport costs are negligible. In the
> Northern Hemi corn arrives half way through year 2 at the new value. Then
> even if the Northern seed corn has already been productively consumed it is
> retrospectively devalued accordingly.
> c) I do not understand Andrew's numbers in his second para. I would say
> that in the case under (b) the output price for year 2 would be £180 (not
> £200) because less value is transferred from the seed corn; and the
> *realised* profit would be 60 over 120 i.e. 50%.
> d) In year three the investment would only be £100 if seed corn was
> purchased at £1/qr and the profit rate would go up to 80 0f the output
> price remained £180.
> *However* the input value per quarter would now be *below* £1 because 200 q
> at the end of year 2 would be valued at £180. And the output price would
> also decline below that.
> We would be into a real time iteration of input/output price discrepencies.
> e) The iteration might be considered not as a real time one but as
> telescoped back to the start of year 3 on the grounds that the new
> technique has been validated by then i.e. continual moral depreciation of
> seed corn is applied all at once; the hit is taken straight away.
> f) Just as in the transformation problem there is a choice of 'temporal' or
> 'simultaneist' iteration. In the one case value would decline to its
> asymptotic limit. In the other case the excess price would decline
> gradually to meet the new value.
> It all depends what you want to mean by value.
> (Naturally to isolate this issue theoretically we must apply cet par, e.g.
> the price of labour power stays the same notwithstanding the cheaper corn.)
> Chris A
>
> P. S. Please note that I have a new Email address,
> <cjarthur@waitrose.com>
> but the old one will also run until the summer. (To be doubly sure load both!)

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