[OPE-L:3590] Re: Constant capital in the New Interpretation

From: Fred B. Moseley (fmoseley@mtholyoke.edu)
Date: Tue Aug 01 2000 - 10:21:39 EDT

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Hi Duncan,

Thanks very much for your comments on my "sympathetic critique" of the New
Interpretation in the current RRPE in (3587).

I am basing my understanding of the New Interpretation's treatment of
constant capital on Chapter 6 of your book (Understanding Capital) and the
following paragraph in your 1982 RRPE paper:

"It is clear, however, that the aggregate price in the two economies will
generally differ, and that the average rate of profit in the second will
not be equal to the average rate of profit in the first. This is because
the prices of the non-labor inputs to production can deviate from their
labor-values, thus changing the non-wage costs which enters into the
denominator of the rate of profit ..." (p. 45)

This passage sounds to me like in the "value economy", you assume that
constant capital is equal to the VALUE of the non-labor inputs and that in
the "price economy" you assume that constant capital is equal to the PRICE
OF PRODUCTION of these non-labor inputs. Therefore, constant capital
changes in the transition from the "value economy" to the "price economy,"
and hence the rate of profit changes, etc. Am I misinterpretating this

In your book, you talk about the usual "defect" in Marx's method of
determination of prices of production: the failure to transform the inputs
of constant capital and variable capital from values to prices of
production. You say this criticism with respect to constant capital "has
generally been considered a valid one" (although not with respect to
variable capital, which is of course the main innovation - and am important
one - of the New Interpretation). In other words, you seem to say that
Marx did indeed first determine constant capital as the value of the means
of production and he failed to transform constant capital to equal to the
price of production of the means of production.

I guess I should have quoted these passages in my paper, but I didn't think
there was any doubt about this point. As you remember, I presented an
earlier version of my paper with the same main critique of the New
Interpretation (the inconsistent determination of constant capital and
variable capital) at the 1997 IWGVT mini-conference, and you were a
discussant for this session, and I don't remember you making this point
there. Rather, I remember you saying (I don't have my notes with me) that
it doesn't really matter how constant capital is determined, and I replied
that it does matter precisely because of the reasons you give in the above
passages: if constant capital changes in the determination of prices of
production, then so will theaggregate price and so will the rate of profit.
Did I miss something or am I misremembering?

The degree of integration creates ambiguity in the determination of
constant capital ONLY IF one starts with given physical quantities.
However, one of the main points of my "macro-monetary" interpretation is
that Marx did NOT start with given physical quantities. Rather, Marx
started with given quantities of money-capaital, in the sense that constant
capital and variable capital are both taken as given as the quantities of
money-capital invested in the first phase of the circulation of capital to
purchase means of production and labor-power. I posted a summary of my
interpretation on this point on OPEL last month. When the quantities of
money-capital are taken as given, then there is no problem with the degree
of integration. As you say in your post:

"... given any particular organization of capitalist production into
individual firms, the outlays of individual capitalists for constant
capital can be aggregated across the whole economy."

That is exactly what I am doing, or what I understand Marx to have done:
take the existing degree of integration as given and take the actual
(money) constant capital invested as given for whatever the existing
degree of integration.

I look forward to your response and to further discussion.


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