[OPE-L:3555] Re: Re: Re: money-capital as initial givens

From: Gil Skillman (gskillman@mail.wesleyan.edu)
Date: Mon Jul 03 2000 - 16:42:09 EDT

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Fred writes, in part,

>Paul, I am very glad that you seem to agree that Marx determined prices of
>production in terms of money-capital as the initial givens.

A comment: the fact that Marx takes M as the starting point in his circuit
of capital, the point of Fred's earlier post, does not of itself imply that
Marx always understands capital inputs are denominated in pecuniary rather
than labor-value terms. A logically possible alternative is that Marx
initially understands money capital M as the surface form of a given
magnitude of labor value. This reading is consistent with passages such as
the following from V. III: "In Volumes I and II we were only concerned
with the *values* of commodities. Now a part of this value has split away
as the *cost price*, on the one hand, while on the other, the *production
price* of the commodity has also developed, as a transformed form of
value." [C.III: 263]

Note that: production prices are something that is *arrived at* or
"developed* as a *transformation* of underlying values, the terms of
account in Volumes I (and by extension, the Resultate) and II. The issue
is thus how Marx develops this transformation in V. III.

> Does this
>mean for you, as it does for me, that, since the inputs are already in
>terms of prices of production, Marx did NOT "fail to transform the inputs
>of constant capital and variable capital from values to prices of
>production"? Do you agree that this long-standing and widely accepted
>criticism of Marx, from Bortkiewitz on, is wrong. I hope so!

It would be more accurate to state that Marx failed to demonstrate
*explicitly* the transformation of constant and variable capital inputs
from values to prices of production, and as a result failed to demonstrate
coherently his aggregative claims about the relations between values and
prices of production. Once this explicit transformation is undertaken, in
keeping with Marx's V. I definition of commodity values, one finds that
Marx's aggregative claims are invalid if not simply tautological, which is
why alternative solutions such as the "New" one had to alter Marx's
original definitions (in the latter case, untethering the value of labor
power from Marx's stipulation) in order to restore the aggregative claims
in other than simply tautological form.

It's clear that Marx recognized the *need* to transform constant and
variable capital from their "value-form" to their "price-form," as seen in
the following passage from V. III, Ch. 9:

"It was originally assumed that the cost price of a commodity equalled the
*value* of the commodities consumed in its production. But for the buyer
of a commodity, it is the price of production that constitutes its cost
price and can thus enter into forming the price of another commodity. As
the price of production of a commodity can diverge from its value, so the
cost price of a commodity, in which the price of production of other
commodities is involved, can also stand above or below the portion of its
total value that is formed by the value of the means of production going
into it."
[C.III: 264-65]

The problem is, however, that Marx never actually demonstrates the
transformation from value-form to price-form once he acknowledges that
prices can diverge from values. The transformation depicted in the second
table on p. 256, *and the aggregative claims based on this transformation*
(total surplus value=total profit, total prices= total values) on p. 259,
are developed without actually incorporating possible price-value
disparities--*despite the fact that, as we know now, prices will
necessarily diverge from values given the varying organic compositions in
the 5 sectors Marx posits at the beginning of the Chapter.*

The necessary inconsistencies in Marx's account are readily seen. First,
grant that, for the purposes of Ch. 9 in V. III, constant and variable
capital are represented in their price-form rather than their value form;
that is, they've *already* been transformed from the value terms by which
they were defined in V. I to the cost terms by which capitalists actually
experience them. Next, grant that capitalist competition will equate the
*rate of exploitation* across sectors, i.e. ensure that

(1) Si/Vi = e for all i,

where Si is surplus value in sector i, Vi is variable capital in sector i,
and e is the constant rate of exploitation across sectors.

Now in light of these two givens, the "product values" in the first table
(p. 255) must be understood as *product prices* under a system of
capitalist competition that ensures equal rates of exploitation. There's
no other coherent way to interpret them, since constant and variable
capital are in price-form by assumption, and capitalist competition--which
is based on prices, not values--equalizes the rate of exploitation by
assumption. This dictates in turn that for each sector i,

(2) Ci + Vi(1+e) = Pi for all i,

where Ci is the price-form of constant capital in sector i and Pi is the
commodity price in sector i following from the conditions stated above.

But next Marx asserts that capitalist competition must *also* equate the
rates of profit across sectors. If Ci and Vi are interpreted as *already*
transformed into their price-form, per Fred and the passage quoted above,
this means that

(3) Si/(Ci +Vi) = r for all i,

where r is the economy-wide rate of profit induced by capitalist competition.

But since this is a consequence of capitalist competition, enacted in the
price-world, it must then be that (ignoring, by Marx's stipulation at the
beginning of the chapter, any complications from unequal rates of
depreciation of constant capital goods)

(4) (Ci + Vi)(1+r) = Pi for all i.

Here, the Pi are "officially" the sectoral "prices of production" as Marx
defines them on p. 257. *If* we accept, however, that constant and
variable capital inputs have already been transformed into their price-form
(a transformation that Marx fails to demonstrate), then the Pi's must
simultaneously satisfy equations (2) and (4). It is readily shown that
this is only possible if organic compositions are identical across sectors,
which of course *contradicts* Marx's original stipulation. There's no way
around this other than denying that capitalist competition equates sectoral
rates of exploitation (or something similar) or denying that the constant
and variable capital inputs were "really" transformed.
On the other hand, if we *don't* require that capitalism satisfies (2) and
(4) in the price world--that is, if we give up on the notion that
capitalist competition (and thus capitalist prices, N.B.) equates the rate
of exploitation, then Marx's aggregate equalities fail to hold.

So necessarily *either* Marx's "transformation" is in error, or the central
conclusion of his "transformation" is erroneous. Either way, Marx's
analysis of the "transformation" includes a fundamental error.


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