[OPE-L:3539] Re: Non-constant returns to scale and the LTV

From: Rakesh Bhandari (bhandari@Princeton.EDU)
Date: Sun Jun 25 2000 - 21:41:07 EDT

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Re 3531
> since DRIS
>implies an upward-sloping industry supply curve, both a commodity's market
>price and its labor value are dependent on the level of demand, which is a
>function of the commodity's *use value*: The higher is market demand, the
>higher are average and marginal costs of production, the lower is the
>average and marginal productivity of labor, and thus the higher are both
>market prices and labor values. In no sense can it be said that commodity
>prices are "regulated" by values, since both prices and values are
>determined by the level of demand (not to be confused with the level of
>*quantity demanded*, which is a function of the price. The level of
>demand, i.e. the "demand curve", is determined by factors other than a
>commodity's price).


To see how Marx, UNLIKE RICARDO, builds DEMAND into his concept of
value,let's turn to chap 10 of vol 3. Your criticism applies to Ricardo's
theory of value, not Marx's.

Marx often conducts the analysis in terms of market values, instead of
production prices. The former is applicable to independent commodity
production (the historical reality of which I shall sidestep), the latter
to advanced capitalist production.

Marx defines market value: "Market value is to be viewed on the on the one
hand as the average value of the commodities produced in a particular
sphere, and on the other hand as the individual value of commodities
produced under average conditions in the sphere in question, and forming
the great mass of commodities." p.279 (penguin)

It is easy to think of producers in terms of technical relations arrayed
along a bell curve, so that the average line would dissect the gaussian
distribution. The great mass of producers would be located near this line.

However this is not necessary. It could be that the curve is skewed right
or left, so that the average line would not dissect the curve perfectly.
This is in part what Marx is examining this chapter, reminding us that he
was quite aware of the idea of normal distribution (this of course goes
back to his early study of suicide).

Now note that Marx distinguishes between weak and strong demand in terms of
the ability of the latter TO ENTER INTO THE DETERMINATION OF market VALUE.
Strong demand shifts are characterized by absence of negative feedback.

"If the demand is so strong, however, that it does not contract when price
is determined by the value of commodities produced in the worst conditions,
then it is these that determine the market value. This is possible only if
demand rise above the usual level, or supply falls below this. Finally if
the mass of commodities produced is too great to find a complete outlet at
the MEAN market value, market value is determined by the commodities
produced under the best conditions. These commodities may be sold
completely or approximately at their individual value, for instance, in
which connection it may happen that the commodities produced under the
worst conditions fail even to realize their cost prices, while those
produced under average conditions realize only part of the surplus value
they contain. What we have said here of market value holds also for the
price of production, as soon as this takes the place of market value.
(p.280-81; my emphasis)

So Marx does not think it is possible to resolve the debate between Ricardo
and Storch over whether market value or price of production is governed by
the commodities produced under the least or most favorable conditions
unless one considers the possibility of STRONG shifts in demand. A strong
positive shift in demand would skew the production curve to the left and a
strong negative one to the right. And market VALUE would thereby be

Marx also argues that both failed to see how in the absence of such strong
demand shifts market value would tend be determined by the bulk of
producers in a normal distribution.

Ultimately it all depends on how you define value or socially necessary
labor time. For example, Patrick Murray quotes Carchedi: "The basic
difference between the Marxian and the neo Ricardian notion of value is
that that for the latter value is embodied labor and is determined by the
technical relations of production, independent of demand." Quoted in
Moseley, ed. Marx's Method in Capital, p. 60. In Frontiers of Poltiical
Economy Carchedi of course pays careful attention to Marx's concept of a
strong demand shift.

Please also see Murray's emendation of the point on p. 50.

You have isolated a problem for the Ricardian theory of labor value, not
Marx's. Again, building demand into the very concept of value does not
commit one to a subjective theory of value.

I must ask you wherein do you think the differences lie between Ricardo's
and Marx's labor theory of value. It's important to get this straight to
ensure we do not saddle the latter with problems in the former. By the way,
does John Roemer ever lay out what he takes Marx's critique of Ricardo to

All the best, Rakesh

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