[OPE-L:4197] Part Two of Volume III of Capital

From: Rakesh Narpat Bhandari (rakeshb@Stanford.EDU)
Date: Sat Oct 21 2000 - 03:46:05 EDT

Re Steve's 4189

>No Rakesh, that wasn't what I was saying.
>A more technical statement of my frustration with your approach is that you
>appeal to a system which, if stated in the form of dynamic equations, would
>have more unknowns than equations.

So--to repeat myself for the umpteenth time--you *arbitrarily* remove 
one of the equations by making input prices the same as output 
prices? Such closure of the system, save one distributive variable, 
is worse than no solution at all. You have no way of reasonable 
closing your system either, save the extra economic resolution of 
distributive shares.

  You have to make believe that equilibrium or simple reproduction or 
long term centers of gravity are reasonable assumptions to hold in 
the analysis of a dynamic capitalist economy.

You have also  missed my point that one simply cannot *determine* the 
input unit prices of production on the basis of the one period 
transformation tableau given that Marx had to have assumed that the 
input mp and wg sold at value (he had not yet derived the category of 
price of production); however, one need not determine them to grasp 
Marx's value theoretic determination of the profit rate or resolution 
of the contradiction between the principle of the average rate of 
profit and the law of value.

Marx was not interested in *determining* the unit prices of the 
inputs or the outputs. He never said that the input prices of 
production are to be transformed into the ouput prices of production, 
conveniently removing one of the equations for you.

  The ks and thus the krs can and do remain unknown, strictly 
speaking, in his transformation exercise but Marx still turns the 
Malthus critique upside down. Marx is not after a price theory here. 
It is only because you have failed to understand what Marx  intended 
to demonstrate that you think the transformation tableau is 
incomplete without a unique determination of prices.

How many times have I said that neither the ks nor the krs need to be 
determined, strictly speaking, for Marx's value theoretic 
determination of the average rate of profit to be a perfectly logical 
hypothesis?  The explanandum of value theory is no longer relative 
prices or equilibrium prices in particular.

Now you seem to be say that I can make prices anything I want on the 
input and output side to allow for the possibility of a value 
theoretic determination of the profit rate.  This seems to be your 

But again I replied to you long ago. The change in prices of 
production, r, s/v, total price/value can be constrained, reasonable 
and utterly realistic if one views Marx's transformation tableau as 
one period in a sequence or if one modifies a simple reproduction 
scheme into one period in such a sequence.

Note my exchange with Allin.  I am not appealing to any-thing or any argument.

It is a perfectly plausible that the average rate of profit in a 
dynamic capitalist system could be determined on the basis of the 
labor theory of value.

>  In such a system, anything argument is
>possible--even, for example, that capital is the only source of value and
>labour only maintains its value input.

Do note that Marx's transformation tableau is meant to demonstrate 
how the law of value governs bourgeois society though to the 
individual entrepreneur capital seems as much the source of value as 
labor. So I am not following the point you are making.

But of course it is possible to construct a model in which the 
average rate of profit is not determined in accordance with the labor 
theory of value. The Sraffian model is one such example. What 
falsifiable predictions does this theory yield? And what falsifiable 
predictions does the Marxian method yield?

I don't think the absence of a fatal *logical* error in Marx's value 
theory confirms or verifies it. It only allows it to be tested for 
explanatory power. This is what one hundred years of bourgeois 
criticism, voiced by mainstream and radical economists alike, has 
tried to prevent. You are not interested in tests for the 
falsification of Marx's value theory. You want Marx's value theory 
ruled out even before we get to the 
verification/confirmation/falsification stage on the grounds of a 
fatal logical error.

And please Steve would you refrain from complaining about discussion 
of the logical criticism of Marx's value theory when you have just 
finished a book in which such criticism is developed at length. Again 
the powers of projection on this list are truly astounding.

All the best, Rakesh

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