[OPE-L:3856] Re: Re: NI and all that

From: Rakesh Bhandari (bhandari@Princeton.EDU)
Date: Wed Sep 20 2000 - 00:53:57 EDT

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Re 3851
  But he /can't/ legitimately
>abstract from the deviation of price from value in the means of
>production, since although that is "second order" it is an
>inherent aspect of the mechanism under discussion.


Yes, Marx had assumed price=value. His transformation tableau--which is a
mental model with no relation to actual prices or profit rates--begins with
this assumption only to show that price cannot be directly determined by
labor time; now that Marx has logically relaxed the assumption, he argues
that the cost prices with which he began would have to be modified to
indicate that the invested money sums could not have been determined by
the value of the means of production or (indirectly) the wage goods.

You argue then that we need to know the unit prices at which capitalists
would have purchased means of production and (indirectly) wage goods to
calculate the correct cost prices.

This is correct.

But it is neither rigorous nor analytical to have unit input prices
retroactively determined on the basis of the technical conditions (+one
distributive variable) by which output prices are being determined. Such
interation to consistency as you put it has no warrant. As Alan F has long
pointed out, it's unreasonable to remove one of the n equations this way.
As I said to Ajit, no solution to the underdetermination of the unit input
prices is better than an unreasonable one.

Now what happens if when looking at the tableau we realize--as Marx himself
emphasizes--that the cost prices as given could not be correct? I grant
that Marx cannot then calculate the correct average rate of profit and
prices of production, but I suggest that Marx had no such intention on the
basis of the transformation tableau. He meant only to logically turn the
Malthus critique upside down by showing that the average rate of profit not
only was not a factor additional to value in the determination of prices,
it was the main form in which the law of value asserts itself.

So if we don't require that unit input prices be the same as unit output
prices, it's true that on the basis of the information in the one period
transformation tableau we can't know what the real cost prices are and thus
we won't be able to calculate the correct average rate of profit and prices
of production.

But what we can understand perfectly well is the logic of Marx's Malthus

Moreover, even though Marx's mental model is underdetermined, Marx does
provide us conceptual tools by which to read offical national accounts
against the grain--Ajit never responded to Duncan's point that this, not a
theory of prices, is the point of the NI.

 We can look at the annual product, make some estimate of the costs to the
capitalists (cost price), the mass of surplus value produced, the rate of
exploitation, the value composition of capital. If the profit rate shows
some secular trend, we can make some guesses as to what accounts for its
movement. We are now advised to construct some indicator variables for
underlying and unseen causes such as the VCC, s/v, turnover in accounting
for movements in the profit rate, though of course reduced interest rates
could have major impact without any effect on said causes in terms of which
the mass of sv produced is determined. The spike in the US profit rate
seems largely a result of this, itself a consequence of foreign capital
inflow secured in part through sheer political power.

This should be kept in mind if we think Marx's transformation tableau is
meant to provide a theory of the determinants of the average industrial
rate of profit, instead of simply to resolve in logical and abstract terms
the contradiction between the law of value and the average rate of profit.

>It's all very well for Marx to urge us to "keep this stuff in
>mind", but the problem is that he didn't in fact have a
>theoretical means of taking the price-value divergence of the
>means of production properly into account --

He simply doesn't have to take this into account to make the point he is
aiming at. And if you think price/value deviations are so insignificant,
why are you so bothered that Marx's tableau does not allow for such in
terms of the inputs? Why exactly are you up in arms over this so called
second order complication?

All the best, Rakesh

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