[OPE-L:3625] Re: Re: Re: Re: Re: Re: Re: Re: Re: constant capital and variable capital

From: Rakesh Bhandari (bhandari@Princeton.EDU)
Date: Wed Aug 09 2000 - 11:17:42 EDT

[ show plain text ]

 Instead of meaning "cost price", which implies a particular
>theory of value, you simply meant "cost", i.e., cost to the capitalist or
>investment needed to produce one unit of y is $6.

Yes, Ajit that is what Marx and I mean by cost price. And it is clear that
you were talking not about Smith but Marx whom you have read so much
through Sraffa's or classical eyes that you did indeed think cost price for
Marx as well was c+s, instead of the replacement value of c+v.

>But you should know that Sraffa
>has proven that the concept of cost is irrational or undefined prior to the
>determination of prices.

Such determination assumes the same rate of profit for the inputs (last
period's commodity output) as this period's outputs. You have to justify
the assumptions on which Sraffa's thinking is based (it will not strike any
non economist as a reasonable assumption), instead of offering up the old
dogma that only Sraffian methods can solve the transformation error Marx
himself recognized.

It is simply not true that the input prices are not determined in Marx's
transformation tableaux and thus there must be some method for determining
them on the basis of data within this one period of production. The inputs
come into the tableaux with prices which Marx assumes to be their values as
well. Their prices do not need to be determined by data within that period
of production. Sweezy and Meek (see A Plain Person's Guide to The
Transformation Problem) have offered an incorrect reading of Marx.

>I thought you were critiquing my criticism of Fred's position on how to
>the constant capital.

You know Ajit. Without embarrassment to yourself you called me a Hegelian
for months even as I was flooding the list with my criticisms of Hegelian
interpretations. Jerry tried to point this out to you, but you went on. Now
I have flooded the list with criticisms of Fred's assumption that constant
capital or the value of the means of production is determined by the cost
price of the commodity, and you seem not to notice that I agree with your
refusal to equate them.

So I have accepted the burden of defending the logic of Marx's
transformation without use of the deux ex machina that since the price paid
for the means of production actually equals its value, there is no need
for the inputs to be transformed by some method.

It seems to me that you do not read very carefully.

Now, you say we are discussing some chapter of *Capital*, I
>presume. I don't know when did that start.

You didn't know that the interpretation of Fred's we are discussing is of
Marx's transformations in Capital 3?

No matter whatever Tableaux it is,
>you should know that the total value equal to total prices of production is a
>condition that is imposed on the system because there are n+1 unknowns and
>only n
>equations in the system. It is similar to adding an equation as x=1, that is
>defining commodity x as money commodity. There is no "reason" that total
>value and
>prices of production will equate. However, once you have imposed this
>constraint on
>the system, then your "assumption" will be simply illegitimate because you
>would be
>what is called overdetermining the system.

No, you are missing the nature of Marx's argument, and you don't deny that
I have presented his reasoning correctly.

 If we assume that prices are regulated by the law of value, then Marx
demonstrates it can only be through the average rate of profit due to the
unequal compositions of capital.

In this demonstration Marx assumes the price of the inputs is equal to
their value, but his own demonstration that the law of value can only rule
through the indirect means of the average rate of profit implies that this
assumption built into the tableaux is simply false.

Now indeed if the law of value regulated the formation of prices in the
same way in the prior period as he demonstrates in this period--and why
shouldn't it have?--then the price/value divergences for which he indeed
has to correct should cancel themselves out and thus not affect his
calculation of the average rate of profit and production.

This is simply a logical conclusion based on what we see in the one period
example he has offered.

Now has Marx proven that prices and values are really or must be related in
this way? Or that total value must really equal total price in each
sequential price?

NO! The labor theory of value cannot be proven apodictically.

Marx is offering here a hypothesis about the formation of prices on the
assumption of the validity of the labor theory of value, a hypothesis about
how the law of value works its way out. True enough, the hypothesis must
be free of internal contradiction.

But in order for this hypothesis to be confirmed, there should then be some
falsifiable, unique predictions about capitalist development based on such
an understanding of the relation between prices and values.

But we never get to test Marx's hypothesis in terms of its ability to
account for real crisis-ridden capitalist development (think of the sorry
history of this list) because the bourgeoisie, often through Marxist
academics, have attempted to throw him out of the game on logical grounds
before he is even allowed up to the plate.

It is a terribly sad story that prominent Marxists, Paul Sweezy in
particular, gave their imprimatur to this while never acknowledging
Grossmann's Bortkiewicz critique in his wert-pries essay.

 But many great Marxist scholars were largely wiped out or displaced by
Nazism and Stalinism--real material history has effects on theory--allowing
for the neo Ricardian weed to choke out life in the garden

And this neo Ricardianism is doubtless a sterile weed. Where are the great
accounts of real events by the neo Ricardians? Mattick predicted the end of
Keynesianism. Mandel also predicted the end of the post war boom (see the
excellent piece by Jesus Albarracin and Pedro Montes in the Legacy of
Ernest Mandel). Both tried to make sense of the instabilities of the
international monetary system. But these contributions have tended to be
made quite far away from "Marxist" economics departments.

>So how is value calculated, Rakesh? Why don't you ever answer this simple

I do answer your questions. You previously asked me how is value measured,
and I answered it. What is value? Socially necessary labor time needed to
reproduce a commodity. But above we are talking about whether Marx's
hypothesis of how the average rate of profit is formed and regulates prices
is logically consistent. I am not evading anything. Nor do I have an
interest in doing so. I want the truth of the matter. And so far the charge
of Marx's logical incoherence in terms of the transformation of inputs
seems to me to be a very weak one indeed, despite the best efforts of
experts like you to insist on it. Again, that Marx's theory is not
logically inconsistent in no way demonstrates its truth. We'll have to talk
about the real world at some point.

All the best, Rakesh

This archive was generated by hypermail 2b29 : Thu Aug 31 2000 - 00:00:03 EDT