[OPE-L:3996] Re: Re: Re: Re: Re: Re: Re: Re: Re: m in Marxs theory

From: Duncan K. Foley (foleyd@cepa.newschool.edu)
Date: Fri Oct 06 2000 - 22:36:45 EDT

Ajit writes in part, with my comments:

>Duncan K. Foley wrote:
>>  I don't see why Ajit has such trouble with the idea that money
>  > represents labor time. It seems sort of intuitive to me.
>I don't have such trouble with the idea that money represents labor time. My
>problem is which money, and how and how much of labor time it represents. I
>don't think that when Marx said, "And 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' ..." he simply made a huge 
>error. All these
>are basically price concepts.

I didn't really think you had that much trouble with the idea...

>So Marx's transformation problem is an attempt to
>develop his theory of prices based on labor-values of commodities, which are
>determined directly by the given technologies of production.

This point might bear a bit more examination. Do you think Marx had 
the same idea of a "given technology of production" as Sraffa, or 
Leontief, or we do? It seems to me that in the schemes of 
reproduction, and in the transformation tableaux, Marx seems to think 
of matters at a different level from the notion of a "technique of 
production" defined in purely physical terms.

>That's why I think
>taking prices as empirically given in this context is like putting the cart
>before the horse--it simply negates the theoretical problem posed. So what is
>the problem of "m" in this context? Now we know that by using either 
>Seton's or
>Sraffa's formulations we could derive Marx's prices in terms of any commodity
>as money commodity. In Seton's formulation taking any commodity as 'money
>commodity' directly implies the assumption that we are assuming no value-price
>deviation for that particular commodity.

I don't understand why your last statement follows. If we think of an 
abstract economy with profit rate equalization, and a particular 
commodity (say, gold) performs the functions of Marx's socially 
accepted general equivalent, why shouldn't we assume that commodities 
express their exchange values in terms of the ratio of their own 
price of production to the price of production of gold? Why can't the 
money commodity have a "value-price" (I would prefer to say "embodied 
labor coefficient-price") deviation just like all the other 

>...If we leave out your empirical
>derivation of "m", and just deal with the claim that labor theory of value
>implies that the prices of net output (and in this case the prices 
>will have to be prices of production and not the empirical market 
>prices) must equal total live labor time. Then this gives us another 
>"m". But then this is again a decree similar to saying that 
>value-price deviation is zero for the money

This gets close to the heart of the difference in ways of looking at 
the problem. The NI value of money depends, as you have pointed out, 
on the actual net product, which you view as a defect, but it seems 
to me could be argued for as a virtue of the concept. Historically 
the labor expended is embodied in a particular net product.

>  Moreover, given this "m" when we analyze the property of Marx's
>system, we find that many conclusion derived from taking this "m" do not sit
>well with Marx's analysis of his system. Same happens with other such
>candidates such as taking total prices of gross output equal to total gross
>value on the ground that prices must be bound by the total value substance.

At the risk of repeating myself, let me repeat myself. The problem 
with gross output is that it is not well-defined except in special 
abstract models like the circulating capital model of production, and 
is, in particular, not unambiguously defined for real capitalist 

>  It
>seems to me that Sraffa's standard commodity comes closest to what Marx was
>looking for, but still is not completely satisfactory in my opinion. Thus i
>think the problem as posed by Marx is still unresolved, and probably

In my opinion the unresolved and probably unresolvable problem is 
Ricardo's problem of the invariable standard of value. I still don't 
see why you link the standard commodity to this issue, since Sraffa 
himself rejected that interpretation, and later loyal Sraffians like 
Heinz Kurz have taken great pains to show that while the standard 
commodity  simplifies the real wage-profit rate relation by 
linearizing it (assuming that wages are paid at the end of the 
production period), it does not constitute a standard of value which 
is invariable with a change in the real wage. (Unless the real wage 
happens to coincide with the standard commodity, which there is no 
theoretical reason for supposing to be the general case).

>Now in your above statement, "...the basic macroeconomic determinants of
>profitability are the ratio
>of the value of output to the value of capital (what Tom Michl and I
>call the "productivity" of capital) and the ratio of profit to total
>value added (which is a transformation of the rate of exploitation).
>I take the essence of Marx's theory of value to be the observation
>that you can't change the rate of profit in the macroeconomy without
>changing one or the other or both of these variables."
>I'm not sure what you are trying to get at. In monetary terms your ratio of
>"value of output [gross] to value of capital" minus one will give you the rate
>of profit, i presume.

Not quite, since you have to deduct wages to get the profit rate. The 
productivity of capital minus one gives you the "maximal" profit rate 
corresponding to a zero real wage.

>Now this rate of profit is determined and will not change
>unless something changes either the value of output or the value of capital.
>What is the significance of the second ratio here? In anycase, I do not have
>any quibble over these macro level definitional identities. My problem is, how
>these macro level definitional identities help us in solving Marx's
>transformation problem?

The "other factor" is the division of net output between wages and 
surplus value, expressed as the ratio of profits to the value of net 

I think "Marx's transformation problem" boils down to the question of 
whether it is possible to reconcile the appearance that profit is 
proportional to capital (at the level of abstraction of Smith or 
Ricardo's "natural prices") with Marx's view that the essence is that 
surplus value is unpaid labor time. Marx argues that it is possible 
to reconcile these points of view by regarding competition as a 
process of redistributing a given surplus value among the 
capitalists. This seems to be a reasonable and persuasive approach.

In the notes that Engels published as ch 9 of Volume III of Capital, 
Marx makes a first pass at a mathematical (or at least arithmetic) 
demonstration of this idea, but falls into the fallacy of claiming 
that not only the aggregate surplus value, but also the aggregate 
profit rate, will be invariant to the redistribution of surplus 
value. In my reading, at least, Marx is aware that things are a bit 
more complicated than that because of the possible repricing of the 
elements of constant capital, but he doesn't pursue the matter, and 
doesn't seem ever to have returned to it systematically.

The point I was trying to make was that perhaps Marx was more 
interested in the macroeconomic determinants of the profit rate and 
surplus value than he was in the determination of relative prices.


Duncan K. Foley
Leo Model Professor
Department of Economics
Graduate Faculty
New School University
65 Fifth Avenue
New York, NY 10003
messages: (212)-229-5717
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e-mail: foleyd@cepa.newschool.edu
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webpage: http://cepa.newschool.edu/~foleyd

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