[OPE-L:3629] Re: Re: Re: constant capital and variable capital

From: Fred B. Moseley (fmoseley@mtholyoke.edu)
Date: Wed Aug 09 2000 - 15:21:26 EDT

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Responses below to Ajit's (3600). Ajit, thanks again for the discussion.

At 02:11 PM 8/9/00 -0400, you wrote:
>> Fred:
>> 1. The general analytical framework of Marx's theory is the CIRCULATION OF
>> CAPITAL, expressed symbolically as M - C - M' (or expanded to include
>> production). This is what Marx's theory is all about. This
>> framework is introduced in Chapter 4 of Volume 1 ("the general formula for
>> capital") and maintained as the focus of Marx's theory throughout. Marx's
>> analytical framework is NOT "the production of commodities by means of
>> commodities", expressed in physical quantities and input-output matrices.
>> (M-C-M') is not just a minor illustration, with no significance for Marx's
>> theory and Marx's analytical framework. (M-C-M') IS Marx's analytical
>> framework. It is the way that Marx posed and analyzed the main questions
>> in his theory.
>I think these strong statements could get you in serious trouble. M-C-M' can
>also represent the pure mercantilist circuit of buying cheap and selling
>profit upon alienation is not ruled out by the circuit itself. And we all
>what Marx thought of such theories. His postulation that equal values
>was designed to rule such possibilities out. So your claim that "This is what
>Marx's theory is all about" is pretty misleading, to say the least. The
idea of
>production is not just an incidental elaboration (or as you put it "or
>to include production") to this general formula of M-C-M', which is the main
>subject matter. Marx introduces M-C-M' at the individual capitalist's level,
>and not necessarily at the level of the aggregate capitalist system. If this
>was what Marx's theory was all about, then one would have expected that the
>most central concern of Marx's theory would be to develop a theory of
>supply of money. Because, according to the formula, the supply of total money
>in the economy must increase after every round of circulation. By how much
>supply of money must increase, and where does that increased supply of money
>come from should be the logical theoretical concern for anybody claiming that
>the explanation of M-C-M' is what my theory is all about. I don't find
Marx to
>be much concerned about a theory of supply of money in *Capital*. How do you
>explain that?

Ajit, you are right that Marx is not much concerned about the supply of
money. But he does indeed provide a theory of the supply of money - in
Chapter 3 of Volume 1, pp. 217-220. Here he argues that the supply of
money depends on the total price of all commodities (which is determined
independently of the supply of money) and the velocity of money. This is
of course also a critique of Ricardo's "quantity theory of money".

(Please note that the title of Chapter 3 is "MONEY, or the Circulation of
Commodities"; in other words, this chapter is about money, and the role of
money in the circulation of commodities. This chapter is part of the
necessary preparation for Marx's theory of capital (MONEY that becomes more
money) in Part 2 and beyond. If Marx's theory of capital is about
labor-times rather than money, then why would Marx devote so much attention
in Part 1 to money? Is all this emphasis on money in Part 1 suddenly
abandoned altogether in Part 2 and the theory of capital is instead solely
about labor-times, unrelated to money? I don't think so.)

Marx also addressed your question about the increase in the money supply
that is necessary to realize the increment of money that emerges in the
circulation of capital - in Chapter 17 of Volume 2, entitled "The
Circulation of Surplus-Value". Here Marx argues that this queston is
really a non-question, or rather it has already been answered in his
earlier discussion in Chapter 3 of Volume 1. Marx says:

"However, none of the laws put forward with respect to the quantity of
money circulating for the purpose of commodity circulation (Volume 1,
Chapter 3) are in any way altered by the capitalist character of the
production process…

"The general answer has already been given: if a mass of commodities of x
times £1000 is to circulate, it in no way affects the quantity of money
needed for this circulation whether the value of this commodity mass
contains surplus-value or not, or whether or not the mass of commodities is
produced under capitalist conditions or not. Thus the problem itself does
not exist." (C.III: 406-07)

(Please note that this Chapter 17 is about SURPLUS-VALUE, which is defined
and discussed throughout this chapter, as elsewhere, in terms of MONEY.
Since circulation involves buying and selling and hence money, the
circulation of surplus-value must be the circulation of money. The
circulation of labor-times, unrelated to money, makes no sense. Indeed,
this point applies to Volume 2 ("the circulation of capital") as a whole.)

Marx also returned to this question in Chapter 20, Section 12 of Volume 2,
pp. 549-56.

Therefore, following Ajit's own logic, Marx's discussion of these issues
related to the supply of money supports the monetary interpretation of
capital, and contradicts the labor-time interpretation. If capital were
defined in terms of labor-time only, unrelated to money, why would Marx
bother to discuss the supply of money?

>As far as I'm concerned, the introduction of M-C-M' at the individual
>capitalist level by Marx plays two roles for his theory. This helps him to
>introduce the idea of circularity or spiral motion of capitalist
production as
>opposed to the idea of linear notion of production which ends with
>consumption--it is a similar (but not exactly the same) notion as the
title of
>Sraffa's book, 'production of commodities by means of commodities'.

I would argue (and have argued) that Marx's theory is fundamentally
different from Sraffa's theory in precisely the respect that we have been
discussing - Sraffa's theory is not about money at all. There is no
explanation of the necessity of money (such as Marx provides in Section 3
of Chapter 1). And there is no analysis of the circulation of capital
moving back and forth between circulation and production. Sraffa's theory
is only about production. In what sense is Sraffa's theory about a
circular flow (since it is not a circular flow of money and commodities as
components of capital?

>it is used as a motivational device to introduce the subject matter to the
>reader by positing a mystery or a problem at the outset. So the reader by the
>end of the chapter six is lured to the main subject matter [...]

So Chapter 4 is only a "MOTIVATIONAL DEVICE"?! It lures the reader in by
posing a question that readers are interested in (where does dM come
from?), but then Marx pulls a "bait and switch" and changes the subject?!
I think this is very far-fetched. Chapter 4 poses the central question
about capitalist economies, which Marx then goes on to answer in the rest
of Volume 1. Especially in the key Chapter 7. As I have already
emphasized, Marx's theory of surplus-value in Chapter 7 explains how an
initial sum of money becomes a greater sum of money. He concludes: "The
trick has at last worked… MONEY has been transformed into capital." THAT
is the phenomenon to be explained, not the determination of surplus
labor-time, unrelated to money.

Ajit, you didn't mention Chapter 7 at all in this post. How do you
interpret this key chapter in which Marx presents his basic theory of

If the main question of Volume 1 is not the explanation of dM, what would
you say is the main question? And what textual support is there for this

>> Fred:
>> 3. Surplus value is also defined in Chapter 4 in terms of MONEY, as the
>> increment of money, dM, that emerges at the end of the circulation of
>> capital (pp. 251-52).
>Fred, you are reading the motivational chapter and interpreting such
>as final. My sense is that you are referring to Marx's statement,
"...where M'
>= M+ dM, ie. the original sum advanced plus an increment. This increment or
>excess over the original value I call 'surplus value'." as the definition of
>surplus value. But you forget that the very next chapter introduces the
>contradictions in this general formula, and then later on it is argued
that the
>surplus value is not more money but rather the excess of labor-time that
>workers perform over and above the labor-time they get in return for their
>labor in the production process.

How does Chapter 5 ("contradictions in the general forumla") change the
definition of surplus-value? Indeed, the Chapter 5 analysis remains
restricted solely to the sphere of circulation and the main point is that
it is impossible to explain dM (i.e. surplus-value) on the basis of
circulation alone.

Ajit, WHERE is it argued that surplus-value is NOT more money but rather
excess labor-time? I think you are confusing the DEFINITION of
surplus-value and the DETERMINATION of surplus-value. Surplus-value is
DEFINED as dM (3 shillings in Chapter 7) and is DETERMINED by surplus
labor-time (6 hours in Chapter 7). If "surplus-value" were defined as
surplus labor time, then what would determine surplus labor time? The
technical conditions of production and the real wage? This is Sraffa's
theory, not Marx's theory; certainly not Marx's theory as presented in
Chapter 7 and the rest of Volume 1.


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