# [OPE-L:3588] Re: Constant capital and total price in the New Interpretation

From: Ajit Sinha (ajitsinha@lbsnaa.ernet.in)
Date: Wed Jul 26 2000 - 06:27:02 EDT

I have not received my copy of the latest RRPE yet, so have not read Fred's
paper. But as far as i remember, he has made this point earlier too, perhaps in
his contribution to the transformation problem in his edited book. I think
Fred's recommendation creates much serious problem for the NI approach. If you
measure the "C" component of the C+V+S by multiplying the money price of "C"
with the "value of money" then in general the value of "C" so calculated in
labor-time unit will be different from its value as calculated by the
labor-time it takes to reproduce the "C". Thus the C+V+S in terms of labor-time
measured by Fred's method will have no objective status. In this case, on what
ground the total value of C+V+S in terms of labor-time could be defended--what
does it mean, frankly? At least the relationship of the money value of net
output with the total V+S has some objective basis.

But most damagingly, let's suppose "C" is the seed corn used to produce corn.
Now, once you say that the value of the seed corn is determined by the money
price of corn multiplied by the value of money, you have already determined the
value of corn without any reference to V and S. As a matter of fact by
multiplying the money price of corn with a constant (the value of money) has no
theoretical relevance. In my opinion, Fred's prescription spells desaster for
NI. It should stick to a macro level national income accounting, in my opinion.

I don't understand Duncan's point about the problems of calculating constant
capital. Let us leave the fixed capital out, and work with a circulating
constant capital model (as Marx most of the time did) where all the constant
capital is used up in one production cycle. Since NI does not have a consistent
way of calculating "C", Duncan's position, as i understand it, reduces to a
model of production without "C". This was the case with Adam Smith and Ricardo
in several arguments where they considered the case of total capital advanced
as advances against wages only. Marx was quite severe in criticizing both Smith
and Ricardo on their habit of forgetting "C".

Moreover, my criticism of NI approach that came out in 1997 (no.3, RRPE), and
is also repeated in a footnote of the current issue, that in the NI approach
the definition of exploitation of labor becomes dependent on the allocation of
labor rather than the structure of production flies in face of Marx's notion
of value and exploitation has not been responded to by Duncan or anyone else.
Recently one Spanish author (I forget his name), apparently independently, has
come out with a mathematical proof in the Cambridge Journal of Economics of
exactly my point . Cheers, ajit sinha

Duncan K. Foley wrote:

> 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
> Duncan K. Foley
> Leo Model Professor
> Department of Economics