[OPE-L:4064] Transforming the inputs (was revaluation)

From: Rakesh Narpat Bhandari (rakeshb@Stanford.EDU)
Date: Thu Oct 12 2000 - 13:55:28 EDT

Re 4086

>I also have not found this interpretation in Meek or Sweezy.  They, and
>people like Bortkiewicz, Seton, and so forth seem not to have been
>working with models of simultaneous determination of value.  They instead
>employed models of reproduction and, it seems to me, "deduced" their
>interpretation from the "requirements" of reproduction.


As Allin posts have made clear, it seems that a simultaneous (or 
iterative) solution was justified not from a prior assumption of 
simple reproduction or equilibrium but as the only way by which a 
determinate transformation of the inputs could be carried out; 
moreover, the correct prices of prod for the outputs can indeed not 
be computed without those modified cost prices.

Alejandro, Fred and the TSSers--whatever the other 
disagreements!--all take the inputs  as already in price of 
production terms (I am unclear about you see this, though), but I 
consider this to be impossible since Marx had not yet derived the 
category of price of production in terms of which the inputs are to 
be transformed until the completion of the second tableau. They can't 
be sold at prices of production at the beginning of the tableau.

  I also therefore disagree with Sweezy, Duncan, Allin, Ajit and 
others that by having the inputs sell in money terms at value, 
instead of prices of production, Marx made a logical mistake--it 
would have been illogical for Marx to have invoked a category which 
he had not yet derived logically.

To transform the inputs,  Bort/Sweezy had to assume that the input 
prices were the same as the output prices--that is, the same PV 
ratios would apply to the inputs as the outputs, as Allin just 

  This was done by putting the transformation tableau into equilibrium 
or simple reproduction models--that is, transforming Marx's own 
transformation. That is, they create a third tableau, again as Allin 
has done.

  Equations were then derived and  solved for (and could be solved 
given one more condition because 1 of the other n equations had been 
removed arbitrarily by having input prices equal output prices, as 
Alan F has noted). No solution could respect both the 2 equalities; 
as Allin has indeed shown, any solution for the PVs derived for the 
ouputs and then applied to the inputs also disallows--aside from the 
breaking one of the two equalities--the value of the input mp and wg 
from determining the sum of the  prices of production  of the inputs. 
So there are really two of three equalities being broken, though this 
has yet to be pointed out as well.

I have said all along that

1. this timeless and backwardly causal way of determining the input 
prices of production is worse than no solution at all. Alan F is of 
course right here even if no one is listening to him.

2. based on what his second tableau shows, it was perfectly 
reasonable for Marx to assume that no matter the prices into which 
the inputs were transformed, the sum of the prices of production of 
the input would be determined by their aggregate value just as in the 
case of the outputs. That this also implies that unit prices would 
change interperiodically is hardly unrealistic (Allin will see that 
his last response to me which he has retracted anyway makes the 
unreasonable assumption that total value/price cannot be different at 
t+2 than at t+1 even as labor time is being added to the system--that 
is, he has eliminated once again time subscripts).

Why interperiodic change in unit prices is considered unreasonable 
may not so much be that this would break equilibrium or simple 
reproduction but that there would then be no way of  uniquely 
*determining* unit input prices via homogeneous linear equations, not 
that such change is unrealistic. It was never asked whether there was 
any other way of transforming the inputs or whether for Marx's 
purposes they had to be transformed.

That is,  in order to solve the price problem--that is, to uniquely 
determine the kr's in Marx's tableau--it had to be assumed that the 
prices of prod into which the inputs were to be transformed were the 
same prices of production as the outputs--hence, the necessity of a 
simultaneous or iterative solution.

Without this there is no way of getting the exactly right modified 
cost prices and thus uniquely determining the krs. And bourgeois 
economists feel naked if they cannot solve the price problem.

3. However, if the sum of the cost prices is not changed by the 
transforming of the inputs--and as I have been trying to show Allin, 
Marx was perfectly justified in assuming that what held for the 
ouputs would hold for the transformed inputs: total value would 
determine the sum of the prices of production for the inputs as 
well--then Marx's value theoretic determination of r and the 
resolution of the contradiction between the principle of the average 
rate of profit and the law of value remain COMPLETED on the basis of 
the demonstration in the second transformation tableau.

I disagree with Allin and other critics that there is anything 
incomplete about Marx's solution to the exact problem which he set 
himself. It's a matter of reminding ourselves the exact problem Marx 
inherited from the Ricardo/Malthus debate.

4. Marx leaves behind the outstanding problem  of the determination 
of the modified cost prices (the ks) on the basis of transformed 
inputs and thus the exact determination of the krs in each of the 
respective five branches because he has already shown that the form 
in which the law of value asserts itself in a developed capitalist 
society is no longer via the direct determination of prices. The 
analysis of capitalist reality on the basis of the law of value 
simply moves away from the determination of relative prices.

5. This does mean however Marx does not provide a rigorous solution 
to the same problem taken up by bourgeois microeconomics: equilibrium 
prices (see Korsch). He does however solve the problem which he set 
himself--turning Malthus' critique of Ricardo upside down (see 
Ilyenkov). That is, the more capital develops, the more the principle 
of the average rate of profit itself becomes the form in which the 
law of value asserts itself, rather than a modification or 
contradiction to the law of value.

6. Again, none of this proves that the law of value actually  does 
assert itself in the form which Marx lays out. It is only a perfectly 
logical hypothesis.

All the best, Rakesh

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