[OPE-L:3823] Re: Re: Re: NI and all that

From: Rakesh Bhandari (bhandari@Princeton.EDU)
Date: Sat Sep 16 2000 - 21:54:49 EDT

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>Rakesh Bhandari (bhandari@Princeton.EDU) wrote:
>> In 3791, Ajit argues that he never agreed to the definition of cost price
>> as the money sum laid out as constant and variable capital. He then accuses
>> me of playing games. This is all quite sad, and evidence that this
>> discussion is not being conducted in ethical terms even as I have made
>> efforts to grant to him the validity of many of his criticisms. If Ajit
>> would simply take the time to consult his own replies to me--as he should
>> have before accusing me of playing games-- he will most certainly find a
>> post in which he agreed to exactly this (he will find his own post in which
>> he copied large parts of one of mine, expressing assent to certain parts
>> and criticisms of others). I would hope that an apology is forthcoming.
>Rakesh, I do not have time to waste with this sort of nonsense. How can I say
>something with which i patently disagree with? The games I mentioned is simple.
>To show to you, Fred, and many others on this list, that your arguments are
>absurd I have no other recourse than to accept many of your implausible
>assumptions and interpretations, particularly the starting points of your
>arguments, and then logically show that they lead to absurdity. Then you guys
>turn around and say 'see Ajit has accepted our basic starting points etc.' And
>I'm now tired of this sort of game, which is basically a waste of time for me.
>I have my research work to do. I have tried my best to let many of you on this
>list to know the serious weaknesses in your arguments, so that you can improve
>upon the quality of your work. If you are not convinced then well, it's too bad
>for everybody concerned.
>Cheers, ajit sinha


All you have let me know is that you refuse to read what Marx wrote. It is
not mine but Marx's starting point in vol 3 which you refuse to recognize.
I reasonably took your 3722 to be your agreement that Marx does indeed
define cost price as the money sum laid out as variable and constant
capital. There is not a hint of conditional acceptance of *Marx's*
definition in said reply.

In the transformation procedure Marx is not recognizing the need to
transform the inputs from values to prices. He recognizes the need to
modify cost price, not transform the inputs from values to prices. The
necessary form of appearance of value is money price--commodities are
produced as bearers of value, as potential materializations of social labor
time as such, as abstract labor time.

And--to use my Aristotlean formulation--commodities can only actualize this
function if they are succesfully ex-CHANGED at a money price, for only the
money commodity directly incarnates social labor time. Marx recognized
money to be sufficiently puzzling to warrant explanation.

 Value as a substance changes in (ex)change, from private labor to
actualized social labor. For Marx substance is not what remains constant
but what changes in change. This is simple Aristotle.

Now the necessity of money is derived from Marx's ABSTRACT LABOR theory of
value which is decisively different than the classical one.

 The necessity of money cannot be derived from concrete labor in the
process of production of use values; it can only be understood in terms of
abstract labor in the process of producing commodities not as *concrete use
values* but as *abstract bearers of value*, as materializations of social
labor time.

Marx then derives the dazzling money form out of but in opposition to the
world of commodities as the direct incarnation of social labor time as

If money is a commodity such as gold, it is simply a category mistake,
similar to equating the mining department with the university as such. Gold
production does not represent only one aspect of social labor time; only it
directly represents social labor time. This has to be explained and Marx
attempts an explanation on the basis of duality of labor. If you don't
understand that this is what is trying to do, you have understood nothing
at all.

  Money is not merely a convenient invention to overcome the double
coincidence of wants. It is not a device; it is itself the one and only
direct incaranation of social labor time and thus can be panted after
exactly as such in moments of crisis. Money incarnates social labor as if
the uni-versity was only materialized in its mining department.

This is one of the peculiarities of the equivalent form. Other commodities
are not actualized as value or materialized as social labor time unless and
until they are ex-changed into the money commodity.

We are forced to accept such fetististic attributes of gold or the money
commodity since it only by having such properties that our social labor can
be organized; private labor is turned into so much social labor time though
its ex-change into the money commodity in lieu of which people have no
other connection to each other. In this sense it is necessary that
commodity value is expressed in money.

Marx refers to abstract labor as the labor which produces products that can
only serve their function as bearers of value once they have been
ex-changed into money; abstract labor can be differentiated from concrete
labor whose products are simply use values which do not necessarily have to
be expressed in money terms.

 Simply put, in a bourgeois society producers have no other relations among
ourselves and no way to collectively organize social labor except through
things. It can be no other way as long as social labor is commanded by
entrepreneurs for private profit.

If one does not understand the centrality of the two fold nature of labor
in Marx's theory, one cannot understand his answer to the puzzles of money.
Of course you have already said that what Marx has to say about money in
the first part of Capital is of marginal importance!

And I am supposed to take you seriously as a student of Marx?!

I will grant that I have not made the point well--it would take me some
time to spell out the connection Marx is making between the duality of
labor and the necessity of money--but if one is to critique Marx or define
the problematic of Vol 1, part 1, one must at least demonstrate that he
has inkling that Marx is trying to establish some connection here.

It is not a matter of a neo Ricardian bracketing of the question of the
necessity of money, as Paul C says in his reply to Fred's excellent posts.
The point is that the necessity of money simply cannot be derived at any
level of abstraction from the neo Ricardian one. And the inability derives
from an inability to differentiate abstract from concrete labor.

Now Marx also says that money price however always misrepresents value.
Marx alerts us to this from the start; however, he works for some time on
the assumption that no such misrepresentation obtains, setting what he
thought to be dialectical trap for overeager critics.

At any rate, the "inputs" (which is not Marx's term) are already in money
terms--as they have to be (Fred could not be more right)--but the money
that Marx has his capitalists lay out in his transformation tableau is
determined on the not-yet-relaxed assumption that means of production and
wage goods sold at value.

The modification of the cost price can be carried out in one of two ways.
One can hold the technical conditions constant--the same quantity of means
of production and the same number of workers--and then allow that they had
to have cost the capitalist a different money sum than if means of
production and wage goods had sold at value. Or one can keep the money laid
out the same, and recognize that quantity of the means of production and
the number of workers hired has to be different than if the means of
production and wage goods sold at value. Marx suggests the modification in
the first way on p. 265 and in the second way on p. 309.

We are at an impasse because you think Marx has to have some method by
which to determine the actual cost price on the basis of the real unit
prices of the inputs. It is absolutely correct that without the correct
cost prices Marx cannot determine the correct average rate of profit and
the correct prices of production. Moreover, it is absolutely correct that
the correct cost prices can not be determined unless we know the unit
prices at which mp and wg were sold.
Marx has not provided us with a sufficiently powerful calculating machine.

There is indeed nothing in Marx's transformation tableau that allows him
escape from this problem-I loudly grant this point to you; you also argue
that the Sraffian method of simultaneous determination of input/output
prices and the profit rate can get the job done.

Moreover, since you think the transformation is about determination of long
term centers of gravity or equilibrium prices--an assumption which I think
you share with Fred--you argue that it is reasonable to require that the
transformation be solved on the basis of input=ouptut prices, if not in
terms compatible with the conditions of simple reproduction. Even your
dynamic solutions accept the former assumption.

I have argued (drawing from ERNST, Carchedi, Freeman, Giusanni and others)
that this assumption of simultaenous valuation is not only absurd, it
should play no role in vol 3 problems. Where is your response?

Most importantly, Marx's transformation is not about price theory or long
term centers of gravity; it is offered as a dialectical resolution of the
contradiction between the average rate of profit (the empirical) and the
law of value (the theoretical)--see Ilyenkov on whom Andrew Brown is
working, I believe.

 Where the post Ricardians tried either to dowplay the contradiction or
resolve it through verbal games (MacCullough), Marx hypothesizes mediating
links by which the average rate of profit not only does not conflict with
the law of value but can only explained on the basis thereof.

You, along with Sweezy, Meek and Dobb, think Marx failed. You think he has
failed because he has not provided a method by which to calculate the exact
average rate of profit and prices of production in an equilibrium
framework. But Marx was not trying to build a calculator; he was trying to
resolve a contradiction.

According to you, the failure stems from his inability to determine on the
basis of data in one period of production the unit prices not only of the
outputs but also of the means of production and wage goods purchased to
commence the circuit.

But we don't need to know these input prices to understand how it is the
average rate of profit can be determined on the basis of the law of value,
instead of being taken as a factor additional to value in the determination
of prices (Ricardo). This was the problem was trying to resolve, not the
calculation of the actual average industrial profit rate or relative

However the cost prices are modified, we simply don't need to know what
they are to understand the logic of Marx's resolution of the contradiction
between the average rate of profit and the law of value.

At least demonstate to me that you understand how Marx thought he had
resolved this contradiction.

Marx's theory is not a calculating device for prices or even the profit
rate. We do know in a macro sense how the profit rate is determined by
underlying, unseen variables such as the value composition of capital, the
rate of exploitation and turnover. We thus know how to read against the
grain of official statistics, though I have grave doubts about whether
national data, no matter how reworked, can be anything other than
misleading. But some rough idea of the rate of surplus value, the VCC.
turnover, the unproductive/productive labor ratio--or at least their
trends--can be inferred from reworked official statistics. This of course
is what Fred has done.

You will continue to scold me for having no method by which to calculate
the profit rate and prices of production, but I will insist that Marx has
shown how they are formed on the basis of the law of value. One of the
important results of this endeavor is that our interest in unit
prices--whether of the inputs or the outputs--fades into insignficance.

The necessity of money and the resolution of the contradiction between the
average profit and the law of value can be demonstrated without a price

All the best, Rakesh

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