[OPE-L:4175] Re: Revaluation

From: Andrew_Kliman (Andrew_Kliman@email.msn.com)
Date: Fri Oct 20 2000 - 01:24:48 EDT

In reply to OPE-L 4156.

I thank John for his clear answers to my remaining questions.

: I was indeed assuming that the 5th machine was "socially
: necessary."

My interpretation of Marx is that the 5th machine cannot be socially
necessary.  I think it is strange to argue that the 5th machine is
socially necessary for the reproduction of the commodity when, by
assumption, it ISN'T.  Production takes place without it; hence it is

My prior discussion was misleading, because it failed to make clear that
I think the 5th machine isn't socially necessary for reproduction, and
thus doesn't transfer any value, even if *all* firms use 5 machines when
only 4 are necessary.  If that is the case, then my earlier argument
(that ran in terms of the "law of one price") doesn't operate.

In this case, all else being equal, a firm that operates with excess
capacity would not by penalized for having higher-than-average unit
costs, for the simple reason that its unit costs aren't above average:
all firms are operating with excess capacity.   So at any *given moment*,
it is possible that all the firms could "pass on" the costs of their 5th
machines to the purchasers.  But it seems to me that they would then all
be selling their products at a price that exceeds their actual production
costs.  In other words, price exceeds value.  That doesn't mean the law
of value is false; it may still operate *tendentially*.  There's always
an incentive for each firm to plan correctly, i.e., to eliminate the
excess capacity.  Crises also function to enforce that incentive.

Such processes seem to me a good reason to retain the distinction between
price and value here.  The distinction helps us to think about slack in
the system as a whole and the pressures that operate over time to
eliminate the slack.

: My response:  Ok.  I'll say that for the value of production to be
: preserved, it must be used in a production process.  But I will add
: that *all* of the value of the means of production used in that
: production process must be accounted for.

It doesn't seem to me that your 5th machine is used in a production
process.  So it doesn't seem to me that its value is preserved.  We agree
that its value must be accounted for, and we agree that one way of
accounting for value is to record losses.  Putting it all together, it
seems to me that you should agree that the value of the 5th machine is
lost, i.e., never recouped (and presumably written off eventually and
charged against income).

: I don't have any
: "'plausible' conclusions" on this matter.


: My intuition and my
: memory inform me that you and I will agree that the losses incurred
: when devaluation takes place will not simply disappear as they do
: with simultaneous valuation.


: Hence, I push you to "account for" those
: losses as we discuss the transfer of value.

Certainly, they must be accounted for.  This seems to me to be a simple
matter (in principle).  Assume the value of each of the 5 machines is V.
So 5V is the outlay for them.  During the time-span that 4 of them
function in production, they transfer a total value of 4V.  Eventually,
the 5th machine is scrapped, because it rusts out, or because it is
replaced (as the others are) by better machines, etc.  When that time
comes (of course, it could happen piecemeal in reality), the firm's
capital (C) is reduced from C to C - V, and operating profit (P) is used
to cover the loss.  So realized profit of that "period" goes from P to
P - V.  (If the firm sells at value, P = surplus-value.)

So, OK, what am I not seeing?

Andrew Kliman

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