[OPE-L:3916] Re: Re: m in Marx's theory

From: Ajit Sinha (ajitsinha@lbsnaa.ernet.in)
Date: Sun Oct 01 2000 - 04:30:58 EDT

Gil Skillman wrote:

> I'm writing in response to a much earlier post from Fred on this topic.
> Fred writes:
> >
> >..... Marx's labor theory of value, as I
> >understand it, assumes that, in a given period of time in the real
> >capitalist economy, each hour of average social labor produces a certain
> >amount (say, m) of money new-value (or money value added).  Even though we
> >don't know what m is (i.e. we can't observe m), and even though we cannot
> >explain what determines m, the theory assumes nonetheless there is an
> >actual, unique m in the real capitalist economy.  And it is this actual,
> >unique m that is taken as given in the determination of the total
> >new-value produced in this period.
> The measure m is real enough, but its existence does not in any way depend
> on the assertion of a labor theory of value.
> For example, in the NI understanding of m discussed below, m is equivalent
> to what neoclassicists would immediately recognize as the average product
> of labor--in this case, the average *net* product of "socially necessary"
> labor.  But since Marx defines "socially necessary" labor in terms of
> averages in any case, the latter condition doesn't add any bite.
> >>As Duncan has argued in (3761) (and elsewhere), the unique value of m in a
> >given period must be equal to NV / L, i.e. to the ratio of the money
> >new-value produced in this period to the average social labor performed
> >during this period.
> Rather, m is *defined* as NV/L.  The labor theory of value itself doesn't
> demand that this ratio be defined at all; we could instead follow Marx's
> explicit lead in defining commodity values in terms of embodied labor time.
> Then we could determine directly the average labor value of aggregate net
> product, and not bring in prices at all. And the measure NV/L is only
> "unique" if one can agree on how the net product vector mentioned by Fred
> is valued--by labor values?  current prices?  inflation-adjusted prices,
> relative to some base?  Sraffian prices of production?  Neoclassical
> competitive prices?
> >  This does not mean that m is determined by NV / L.
> >It only means that m has this unique value.  We don't know what
> >determines m.
> Rather, m is "determined" by NV/L, but we don't know by this what
> determines NV and L.
> >But whatever determines m, and whatever the value of m, if
> >it is assumed that NV = m L, then m must be equal to NV / L, and cannot by
> >assumption be equal to anything else.
> That's right:  it's equal by assumption, i.e. a tautology.


Actually, in Fred's case it is not a tautology. It is a case of trying to
determine two unknowns with one equation. In his case, both NV and m are unknowns,
only L is known.

> >Now, let's take a quick look at how Marx determined m in Capital.
> >Throughout Capital, Marx assumed that m is equal to the inverse
> >of the labor-time required to produce a unit of gold, or the amount of
> >gold produced per hour of average social labor, which he took as
> >given.  In Chapter 3 of Volume 1, Marx said:  "Henceforth we shall assume
> >the value of gold as a GIVEN factor, as in fact we take it at the moment
> >when we estimate the price of a commodity."  (p. 314)  In Chapter 7, Marx
> >derived his numerical example of m (0.5 shillings per hour) from gold
> >production.  On the assumption that it takes two hours of labor to produce
> >an amount of gold equal to one shilling, each hour of gold labor produces
> >0.5 shillings worth of gold, so that m in all industries (e.g. cotton
> >yarn) is equal to  0.5 shillings per hour.  And so on.
> But clearly this *is not* Marx's determination of "m", as defined above,
> and the quote from Volume I Ch. 3 does not suggest otherwise.  Rather this
> is Marx's determination of the value of a unit of the money commodity
> (gold).  This has no proven relation to the ratio of aggregates NV/L; in
> general, m as defined above and the value of a unit of gold won't be equal.
>  It is up to Fred, or Marx, or somebody, to explicitly demonstrate the
> conditions under which this equality holds.  It can't be assumed.
> >So far as I know, Marx never discussed any modification to this
> >determination of m at more concrete levels.
> "This" doesn't determine m, as discussed above; it determines the labor
> value of a unit of the money commodity, a very different thing than m.
> >  But gold production is also
> >usually capitalist production.  Therefore, the rate of profit in the gold
> >industry should tend to be equalized with the average rate of profit in
> >the rest of the economy.
> Only under conditions of universally perfect (as opposed to either
> imperfect or pure) competition.
> >  This seems to suggest (I could be wrong) that,
> >at this more concrete level of abstraction with prices of production, m
> >would no longer be determined solely by the gold produced per labor hour,
> This begs the question.  It hasn't yet been shown that m was determined
> "solely by the gold produced per labor hour" *in any case*.  And don't you
> mean the direct and indirect labor time *embodied* in a unit of gold?
> >but would also be affected by the equalization of profit rates across
> >industries.
> The measure m would certainly be, *assuming* we were using hypothetical
> prices, such as Sraffian prices of production, to value m.  But then we
> would be departing from the "real" capitalist economy to a hypothetical one
> in which, contrary to fact, profit rates are equalized.
>  But Marx apparently did not discuss this possibility at
> >all.  Nor can I think of Marxists since Marx who have discussed this
> >question.  If anyone knows of any discussions of this issue, either by
> >Marx or others, please send me the references.
> Since it's not what Marx is talking about in Ch. 3 when he refers to the
> value of the money commodity, I doubt if a discussion by Marx that supports
> this point can be found.
> >Hence, this question - the determination of m with prices of production -
> >remains an important unanswered question in Marx's theory.
> Well, it's certainly an unanswered question.
> >Furthermore, there is an additional important and difficult issue involved
> >in the determination of m.  Marx of course assumed throughout Capital that
> >money was a (real) commodity (usually gold).  There has been recent debate
> >on OPEL and elsewhere about whether or not money MUST be a commodity in
> >Marx's theory.  As I have said before, I myself have not yet made up my
> >mind on this issue.  Either way, there are difficult questions.  If money
> >in Marx's theory has to be a commodity, then in what sense is money a
> >commodity in contemporary capitalism?  On the other hand, if money in
> >Marx's theory does not have to be a commodity, but can simply be paper,
> >without any automatic convertibility into a commodity, then how is m
> >determined in this case, since it no longer seems linked to gold at all.
> This looks easier than Fred suggests.  Since it has nothing demonstrable to
> do with the unit value of the money commodity in the first place, the
> determination of m does not at all depend on whether money is a commodity
> in Marx's sense.
> Where does all this leave us?  That is, if the existence of the measure m
> does not depend on asserting any labor theory of value, and conversely if m
> has nothing demonstrable to do with value measures developed by Marx in
> Volume I (e.g., the unit labor value of the money commodity), why bring it up?
> Well, here's one answer:  suppose that working only with value measures
> defined by Marx in Volume I, the aggregate value-price equalities asserted
> by Marx in Chapter 9 of Volume III cannot be shown to hold in general.  And
> suppose further that for some (not particularly evident) reason, you wanted
> to assure that *some* version of Marx's aggregate equalities held.  Then
> you might want to bring m into the picture, whether or not it has anything
> to do with Marx's value categories.
> More specifically:
> 1) In Chapter 1 of Volume I, Marx "deduces" from the fact of systematic
> commodity exchange the conclusion that all commodities with positive demand
> have (indeed, "are") *values*, and that their values are necessarily
> measured by the socially necessary labor time respectively embodied in
> them.  This is a deduction, mind you:  the result is claimed to follow
> necessarily from the fact of systematic commodity exchange.  One corollary
> of this deduction is that labor values are determined independently of
> commodity prices.  They had better be, or else there is no meaningful,
> consistent, and non-tautological sense in which prices "depend on" or
> "presume" labor values.


I think it should say, all *reproducible commodities*.

> 2)  Labor power is a commodity.  Marx says so in Chapter 6 of Volume I.


That is true, but his analysis of labor market later is unable to maintain this
concept for labor power, as i have argued in *Research in Political Economy vol.
15, 1996*

> 3)  Taken together, steps (1) and (2) imply that the value of a unit of
> labor power is the labor time socially necessary to reproduce that
> unit--that is, the labor time embodied in the subsistence wage bundle.
> This is a necessary consequence of Marx's arguments in Chapters 1 and 6.
> 4)  There are two ways of measuring the value of labor power defined above:
>  one is by summing the embodied labor values of each of the goods in the
> subsistence wage bundle.  Denote this by the vector product b*v(b), where b
> is the subsistence wage bundle and v(b) is the corresponding vector of unit
> labor values for the goods in the wage bundle.  Another way to measure it
> is by taking the money wage rate *just necessary to ensure subsistence*,
> measured in the units of some money commodity, and multiplying it by the
> unit value of that money commodity, say the value of gold v(g)--thus, w*v(g).
> 5)  The two methods will not in general give the same number for the value
> of labor power.
> 6)  Furthermore, Marx's aggregate equalities will not in general hold using
> either measure for the value of labor power, along with the measures for
> the values of all other commodities.


All these points are mentioned in my paper 'The Transformation Problem: Is the
Standard Commodity a Solution?', RRPE 32(2), 2000.

> 7)  If these negative results matter to you, you could do the following:
> define the "value of money" v(m) in a manner entirely inconsistent with
> Marx's derivations in Volume I, Chs. 1 and 3--for example, as total direct
> labor divided by the dollar value of net product.  This requires that the
> value of money depend on market prices, contrary to Marx's "deduction."
> Then *define* the value of labor power as equal to the money wage rate
> times the value of money, whether or not the wage rate is the level just
> necessary to achieve subsistence.  Again, this violates Marx's "deduction"
> from the fact of systematic exchange, first by disconnecting the value of
> this particular commodity from the labor time socially necessary to produce
> it, and second by making its value depend on some measure of market prices.
> 8)  Proceeding in this manner, it is readily shown that the v(m) times the
> dollar value of aggregate net product is necessarily equal to the labor
> value of net product.
> 9)  This is not the same as the aggregate equality asserted by Marx, to the
> effect that the labor value of *total* output is equal to the dollar value
> of *total* output.  But Marx's claim is invalid in general, while the claim
> in (8) is tautologically true, once one abandons Marx's deductions
> concerning the necessary measure of value for the specific commodities
> money and labor power.
> (10)  It also follows from the procedure specified in (7) that total
> surplus value equals (the labor equivalent of) total profits, Marx's second
> aggregate equality.
> (11)  Question:  has the foregoing procedure demonstrated a substantive
> role for m in Marx's theory of the capitalist economy?  Or has it
> demonstrated that one can yield one (significantly modified) set of Marx's
> assertions about such an economy as a tautology, but only at the cost of
> violating his "deductive" conclusions about the determination of commodity
> values?


I think everybody should be clear about the fact that the NI, as advocated by
Duncan, has nothing to do with the transformation problem, let alone being a
solution to it. As Marx had no doubt that "... what we call price of production is
in fact the same thing that Adam Smith calls 'natural price', Ricardo 'price of
production' or 'cost of production', and the Physiocrates '*Prix necessaire*',
..." (vol. 3, p. 300, Penguin edition). Anybody with even cursory knowledge of
Smith, Ricardo, and Physiocrates would know that their 'natural prices' or 'cost
of production' or 'prix necessarie' are concepts that relate to individual
commodity prices rather than aggregate prices either industry wise or in terms of
net or gross national product. Unfortunately, Dumenil and Lipietz did present
their interpretations as a solution to the transformation problem. So what could
they have meant by this? Their contribution seems to lie in the claim that the
measure of variable capital, as opposed to Gil's point 3, should be taken in money
terms. This, however, is by no means an anti-Sraffian position to take. Had they
done a good literature search before writing their paper they would have known
that Eatwell about five to seven years before them had made exactly the same
contribution in a well known journal called *Quarterly Journal of Economics*.
Their other contribution seems to be the suggestion that the translation of the
money wages into labor-time units should be carried out by multiplying it with
"m", where "m" is defined as L/NV, where NV seems to be the market value of the
total net output. But as i have suggested in my RRPE 1997 paper, this so-called
"new solution", which in my opinion is a non-solution, exacts a heavy price. We
can no longer define commodity value as c+v+s as Marx does. Moreover, the rate of
surplus value, as defined by them, becomes dependent on allocation of labor, and
so can no longer be defined at the level of production as Marx does.

Furthermore, any attempt to define or derive values from prices or prices of
production leads to all kinds of logical vicious cycles, and obviously goes
against the grain of Marx's understanding of the problem. As Marx was quite clear,
" ... leaving aside fluctuations in market prices, a change in prices of
production is always to be explained *prima facie* by an actual change in
commodity values, i.e. by a change in the total sum of labour-time needed to
produce the commodities. We are not referring here, of course, to a mere change in
the monetary expression of these values." (vol. 3, p. 266, Penguin edition).
Cheers, ajit sinha

> Gil

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