[OPE-L:3587] Constant capital and total price in the New Interpretation

From: Duncan K. Foley (foleyd@cepa.newschool.edu)
Date: Tue Jul 25 2000 - 23:36:16 EDT

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I just read Fred Moseley's piece ("The 'New Solution' to the Transformation
Problem: A Sympathetic Critique") in the RRPE (32(2), June 2000, 282--316),
and wanted to clarify a point that continues to cause some confusion about
the "New Interpretation".

Fred argues that the New Interpretation, or at least my version of it, is
incomplete in that it makes more sense to apply the same method to the
valuation of the flow of constant capital as to the flow of variable
capital (that is, to measure the "labor value" of constant capital as its
money price multiplied by the value of money, or, equivalently, divided by
the "monetary expression of labor time"), and calls the NI to task for not
taking this step. It's notable that Fred, who is a resourceful and careful
user of quotations, does not quote any passage of my paper about constant
capital, though he does quote me explicitly on a number of other issues
(such as the role or money wages) in this paper. Presumably he is basing
his claims on my discussion of the relation of the New Interpretation
treatment of the price-value problem to the Seton-Morishima treatment, in
which I point out the discrepancy between the product of the money price of
the elements of constant capital in the circulating capital model and the
labor embodied in the elements of constant capital.

But the real point is that I don't think the concept of constant capital as
a flow, and hence of "total price" or "total value" or "gross product" can
be unambiguously defined or measured in a real capitalist economy, as
opposed to the lockstep world of the circulating capital model with a
single period of production for all commodities. The reason is that these
concepts all depend on the degree of disaggregation of intermediate inputs,
which is inherently arbitrary. Thus I didn't think that one could
coherently talk in general terms about constant capital as a flow, which
was why my version of the New Interpretation was directed toward value
added and the value of the net product, which are unambiguously definable
and measurable. (In saying this, I recognize that there can be disagreement
about what ought to count as a final commodity--for example, workers'
commuting costs, or the services of within-household labor.) I don't think,
in other words, that I have (or had) a position on the valuation of
constant capital, because I don't think it's a well-defined concept.

While we cannot measure the flow of intermediate inputs unambiguously, we
can measure the stocks of commodities, including means of production,
unambiguously (although the value of the stocks, as John Ernst reminds us,
is not so easy to pin down). Thus concepts like the value of capital and
the rate of profit are much better defined than constant capital or total
price or value. Furthermore, given any particular organization of
capitalist production into individual firms, the outlays of individual
capitalists for constant capital is well-defined and measurable, and could
be aggregated across the whole economy. But the same physical production
could be carried on with very different levels of capital outlay depending
on how vertically integrated production is within firms.

Duncan K. Foley
Leo Model Professor
Department of Economics
Graduate Faculty
New School University
65 Fifth Avenue
New York, NY 10003
messages: (212)-229-5717
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e-mail: foleyd@cepa.newschool.edu
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webpage: http://cepa.newschool.edu/~foleyd

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