[OPE-L:3961] Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: TheTransformationProblem

From: Rakesh Bhandari (bhandari@Princeton.EDU)
Date: Thu Oct 05 2000 - 00:25:18 EDT

On Wed, 4 Oct 2000, Rakesh Bhandari (bhandari@Princeton.EDU) wrote:

> As I noted to Paul C soon after you cut me off here, then
> how do you make sense of the chapter on the production of
> relative surplus value which is nothing but a study of the
> implications of the declining unit value of wage goods,
> thereby allowing a rising rate of exploitation. If this is
> not an analysis in terms of a dynamic definition of
> value--that is, in terms of a continuous decline in the
> socially necessary labor time needed to reproduce wage
> goods--then what would be?

"Look at the first page of Chapter 12.	Look at the little
schematic diagram Marx uses to talk about the necessary labour
time versus the surplus.  He says, Consider a shortening of the
necessary labour time from AB to AB':  What are the
consequences?  Fine, he gives a good answer.  This is
comparative statics.  A dynamic analysis of the same issue would
ask: what are the consequences if 

  d(necessary labour time)/dt < 0 ?

I.e. what are the consequences for the time-derivatives of other
variables of interest?"

My first answer is the intensity of labor and the magnitude of overwork.
The paradox is that the higher the rate of the reduction of socially
necessary labor time, the greater the threat of moral depreciation, and the
more overworked and exploited the proletariat is. Why this was so baffled
that molehill on the flat plains of bourgeois thought. 

With the endogenization of science and technology, the second derivative
could be positive, right? If not, forget it. 

""Further on in the chapter we also have an analysis that runs in
terms of discrete changes.  "Now let some capitalist contrive to
double the productivity of labour...".	And so on".

Marx is certainly talking about change.  He's not doing dynamics
as such."

disagree. Just think about marx's paean to the bourgeoisie's continuous
revolutionisation of the productive forces as early as the CM. Marx left
Prodhoun behind because by studying Ure and Babbage, he understood his
epoch. Do you really think this chap would have wanted to work within the
framework of comparative statics? 

"On the matter that came up earlier:

> Let me make a simple logical point--that the inputs have to
> be transformed into prices of production (remember we do
> agree on this)  does not mean that they have to be
> transformed into the same set of prices of production as the
> outputs.

But Marx is talking (we're now looking at vol. 3, ch. 9) about a
hypothetical equilibrium state in which the rate of profit is
equalized for all capitals. "


" There's simply no (temporal) change
going on in the main argument of this chapter." 

Marx's main point indeed is not to show how one set of input prices at t
changes into another t+1. I agree that the main point of the exercise is
not a dynamic price theory. What the input prices are at t and output
prices are at t+1 is hardly of any interest to Marx. He is not a bourgeois

So the mistake you are making here is thinking that Marx wants to derive
the prices at t+1 via a determination of the average rate of profit.

But Marx's main concern is not price determination. It is to solve a major
problem which bedeviled Ricardian value theory.

While the law of the average profit stipulates that the magnitude of profit
is absolutely independent from the share of capital spent on wages and
transformed into the live labor of the wage worker, the universal law of
value states directly that  new value can only be the product of live

Ricardo tried to dismiss this as an exception to the rule, but Marx
considered MALTHUS' criticism correct: the more industry develops, the rule
becomes an exception and the exception becomes a rule.

Just as Marx turned the Lockean defense of property on its head, here he
attempts to turn Malthus' criticism on its head by showing that the more
industry develops, the more the average rate of profit becomes the form in
which the law of value asserts itself. 

In short, I am not arguing that time subscripted prices are the main focus
of this chapter. I am suggesting that if one simply does not adopt the
stricture that input prices=output prices,  Marx's brilliant reversal of
the Malthus critique easily goes through.

" Marx wants to say something about the relationship
between these states." 

the something he wants to say is noted above. 

" To get at the essence he's ready to
entertain strong simplifying assumptions (first page of the

Annual and identical turnover and D=S. But he does not say that he is
working on the assumption of constant values since in this chapter he is
exploring why prices of production change. Plus, he does relax the annual
turnover of capital in a matter of a few paragraphs.   

 "Dynamic stuff is off the agenda for the moment.  
When we get past the main transformation argument we get a whiff
of dynamics: "In spite of the great changes occurring
continually, as we shall see, in the actual rates of profit
within the individual spheres of production..."  Note: "as we
shall see": this will come later, it's not germane to the
transformation argument as such."

Notice that you didn't give the page numbers here. Why? Simply because Marx
here is assigning a wholly different validity to the Ricardian law of value
than you and Paul C do.

That is, Marx  only grants the approximate validity of the Ricardian law of
 value in understanding the changes in relative prices over time due 
to technical change. Since the average rate of profit is formed and 
changes only slowly, it's a good approximation to relate changing 
relative prices to underlying changes in values.

So in terms of your claims, Marx is not saying that 
price in any snapshot of time is determined by value (there's that 
mediation of the average rate of profit after all) but rather that 
changes in relative prices over time can on good approximation be 
accounted for by changes in the underlying values of the commodities 
in their natural units.

BUT just because the average rate of profit changes slowly (is off the
agenda as you put it) does not mean that prices of production are not
changing in relative and absolute terms due to technical change. 

And it does not mean that Marx is not allowing for and expecting prices of
production of the inputs to differ from the prices of production of the
outputs, assuming of course you have the same commodity mix on both sides. 

So in no way do these passages serve as justification for the stricture
under question, but they indicate that the validity which marx granted the
Ricardian law of value is different than you would have it. 

"In the given theoretical context, then, a difference between
input and output prices for a given commodity can only be a
symptom of an incomplete analysis."

1."Then"?? did I miss the proof, argument here? 

2. Note that you have said incomplete, not logically incorrect, as Ajit
does. That is, you seem to be agreeing that Marx was correct not to have
the inputs in the second tableau in prices of production because the very
category is not derived until the completion of the tableau.

3. We seem to be both agreeing that there could be a third tableau, but as
I shall point out, such a tableau is not needed for Marx to complete his
reversal of the Malthus critique.

Which is to say Marx could now concoct a third tableau in which the cost
price is no longer equal to c+v. He could concoct the numbers for this new
column either on the assumption that means of pro sold above and wage goods
below value in the previous period or vice versa.

It simply does not matter because the average rate of profit will still be
determined in the same way on the basis of the law of value--and this is
the main point of Marx's argument, not dynamic price theory indeed--though
the output prices of production and average rate of profit will be
different than in the second tableau. 

However in this hyothetical third tableau total value will equal total
price, total profit equal total surplus value. 

4. What you seem be saying is that the only way to modify the cost prices
in a non arbitrary way is to do so on the basis that prices of production
are the same for the inputs as the outputs--that is, to determine the
prices of production of the inputs on the basis of the IDENTICAL data as
the outputs, thereby creating a  replicating system as if the economy were
a crystal.  

This seems reasonable to you; this seems absurd to me. And I will repeat
again, we don't need at all to know what the cost prices were to see how
Marx is showing that instead of modifying or contradicting the law of
value, the average rate of profit can become the form in which the law of
value asserts itself. 

 " It has nothing to do with
dynamics, because no dynamics have been posited or specified.  
What is it that is supposed to be "changing" that accounts for
any such difference? "

We are only working on the assumption that the I-O matrix in the previous
period from which the inputs came is not identical to this one by which the
outputs will be produced. There are a million reasons why we can expect
inter-periodic change. What is supposed to be constant that does not allow
for any change? 

" The only thing that is "changing" is the
distribution of profit (surplus value) between capitals, but
that is not a change _in time_, it's an atemporal hypothetical

Yes indeed, it's an atemporal hypothetical comparison of what the outputs
would have sold at in value and price of production terms. As the outputs
search for these two respective points, we are indeed holding everything
else constant. But this in no way means that we have to assume
fantastically that the point towards which the output is groping in terms
of prices of production is the IDENTICAL point at which the inputs were

It seems perverse to me to call for the discarding of Marx's value theory
on the grounds that he did not make such a ridiculous assumption.

All the best, Rakesh

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