[OPE-L:3769] Re: Re: Re: NI and all that

From: Duncan K. Foley (foleyd@cepa.newschool.edu)
Date: Wed Sep 06 2000 - 13:35:01 EDT

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Some followup on Ajit's "small comments":

>Duncan K. Foley wrote:
>> Since there's been some further discussion of the "New
>> Interpretation" on the list, I'd just like to clarify a couple of
>> points.
>> The NI consists of the following observations. If you think that
>> money represents labor time quantitatively, there has to be a
>> coefficient relating money to labor time in any commodity-producing
>> society at any particular time (the Monetary Expression of Labor
>> Time, or its inverse, the Value of Money). If you believe that value
>> is created by the expenditure of living labor, this ratio has to be
>> the ratio of value added to labor expended. If you further want to
>> regard money profits as representing unpaid labor time, then
>> mathematically you must regard the value of labor power as the money
>> wage multiplied by the value of money: the two ideas are logically
>> equivalent.
>Four small comments:
>(1) But this cannot be taken as either as a "solution" to or an
>"interpretation" of the transformation problem. The transformation
>problem, I think, is fundamentally about a theory of prices of production
>and a relation of labor exploitation to profits. In your interpretation,
>the theory of prices of production is simply not addressed.

This point has been made explicitly by Dumenil and me many times. The
NI is, of course, consistent with prices of production and equalized
profit rates, or any other model of competition and price formation.

>(2) Though your theory defines a relationship between labor exploitation
>and total profits, your rate of exploitation is dependent on the
>allocation of labor, and so not rooted in production and distribution, as
>i have explained in my 1997 piece in RRPE. And this is in conflict with
>Marx's notion of exploitation which is rooted in production and

I don't understand why the definition of profits as representing a
surplus value which corresponds to unpaid labor time is not rooted in
production and distribution. When you say that the rate of
exploitation is "dependent on the allocation of labor", you seem to
be assuming that there is some other set of more fundamental
variables that are being held constant. The NI just looks as a
real-world capitalist system ex post.

>(3) Moreover, Marx's transformation was interested in showing that though
>the competitive process of capitalism vitiates the price accounting from
>value accounting, this takes place only on account of the redistribution
>of surplus value among the capitalist class. As far as the relationship
>between capital and labor is concerned, no change takes place. In your
>theory this aspect cannot even be discussed because it simply ignores the
>problem of prices of production.

I wouldn't say Marx wants to show that competition "vitiates" price
accounting from value accounting. He needs, however, to reconcile the
appearance that profit is distributed according to capital employed
with what he regards as the reality that profit arises in the system
as a whole from the exploitation of labor. The notion that
competition redistributes a given mass of surplus value answers this

>(4) Frankly, I don't understand what analytical insight one gains by
>converting labor units to money units and vise versa by using the
>converter "m", the value of money? Cheers, ajit sinha

I don't know that the insight is "analytical", but it does establish
an immediate connection between Marxist concepts like the rate of
exploitation and measured empirical data, like the national income


Duncan K. Foley
Leo Model Professor
Department of Economics
Graduate Faculty
New School University
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e-mail: foleyd@cepa.newschool.edu
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