[OPE-L:4206] Re: Logic and illogic in defending Marx

From: Steve Keen (s.keen@uws.edu.au)
Date: Sat Oct 21 2000 - 18:47:30 EDT

I seem to have stirred up a hornet's nest on this one, and I'll reply to
five posts--Jerry's, Andrew's, Rakesh's, Alejandro's, and Allin's--to try
to set them in context.

Firstly, my plea for discussing other current issues--such as the Internet
Bubble in the USA--was not a request for this list to abandon its
theoretical foundation. It was more an observation that, if we did discuss
such topics, our discussion would not in any meaningful way be informed by
theories of Marxism--because we are still trying to work out the basic
building blocks of such a theory.

If I were discussing this topic on a post keynesian list, then I could use
Basil Moore's theory of endogenous money, Minsky's theory of financial
instability, Wynne Godley's work on social accounting matrices, Willi
Semmler's work on credit cycles, my own extended-Goodwin model of chaotic
interactions in finance, Andresen's model of stock markets... There are
plenty of Post Keynesian building blocks for extended analysis of complex
sub-systems of capitalism.

But what are Marxists able to contribute on this? Of course there are some
components; but the vast majority of academic output by Marxists has been
about ... the transformation problem...

For that reason, amongst many others, I feel quite confident in saying that
there is something seriously wrong in the conventional Marxian
understanding of Marx.

That's why I made my comments, Alejandro: not because I want to dictate
what a marginal group should discuss, but because I want to point out how
this marginal group has let itself become fixated on one subject, rather
than developing an overall critique of capitalism. I argue that this
fixation exists because the core belief that labor is the only source of
value is in error, and the attempt to maintain that while developing more
complex analysis results in impossible complications, which always return
debate to ... the transformation problem.

As for the TSS approach in general and debates with Rakesh in particular, I
think Allin expressed the problem succinctly and accurately: "you're
dodging theoretical refutation, by introducing complicating assumptions as
the argument goes along so that your opponent (e.g. me) is unable to pin
you down to any particular proposition and is eventually forced to give up."

That said, this doesn't characterise Andrew (thanks also for the comments
on use-value, Andrew), who asks:

>>You referred to "a system which, if stated in the form of dynamic
>>equations, would have more unknowns than equations. In such a system,
>>any[] argument is possible--even, for example, that capital is the only
>>source of value and labour only maintains its value input."

>My question is, this.  Don't such arguments (when they are also stated in
>the form of dynamic equations) supply the missing equations?  I don't see
>the mathematical problem.  I realize you disagree with this theory,
>Steve, but isn't that a different matter?

I expect that if you set out a full TSS system of dynamic equations of
expanded reproduction with technical change, you would have a system which
either (a) had the same transformation problem flaws as the classic static
model or (b) had more unknowns than equations.

This can't be established just with arithmetic examples which show
counter-cases: you have to set out a full set of dynamic equations. Because
I reject a key premise of the TSS approach (that labor is the only source
of value) I'm not going to attempt to work this out--it's just too hard.
But this raises Allin's point, which he puts beautifully:

>As regards the transformation, I have this diagnosis.  One
>coherent view of the issue is that stemming from Bortkiewicz.  
>There is a clear argument showing that Marx's two equalities
>cannot both be sustained.  This argument is usually developed in
>relation to a simple tableau showing simple reproduction.  Now
>it would be weird and wonderful if one could show that while
>Marx's two equalities don't hold in *that* case, they
>nonetheless *do* hold in the case of extended reproduction with
>ongoing technical change.  I don't believe you've shown anything
>of the sort.  You've just complexified the example to the point
>where we lose track of the original situation we're trying to
>transform, then "anything goes".

I believe that this pithily summarises what the TSS endeavour is (though I
have yet to read the original Freeman/Carchedi volume), and its likely

This is the point which Rakesh cannot get. I don't require that input
prices "arbitrarily" equal output prices in my analysis of Marx, or
anything else for that matter (and I'm sending you my Steedman paper under
separate cover to make that point: the Sraffian system is *not* my system).
My expectation is that if the expanded reproduction with technical change
and changing prices case were set out in full dynamic equations, then there
would still be a transformation problem (but now in a dynamic guise) if you
insisted that surplus value came solely from labor.

However, I also cannot help but return to a crucial comment of Marx's, from
which he never resiled:

"To explain, therefore, *the general nature of profits*, you must start
from the theorem that, on the average, commodities are *sold at their real
values*, and that *profits are derived by selling them at their values*,
that is, in proportion to the quantity of labour realized in them. If you
cannot explain profit upon this supposition, you cannot explain it at all."
(Footnote: **Marx, K.*, "Wages, price and profit"in *Marx-Engels Selected
Works*, Volume I, Marx-Engels-Lenin Institute (ed.), Foreign Languages
Publishing House, Moscow, 1951, p. 384.)

The TSS approach appears to me to be an attempt to explain "the general
nature of profits" in a situation in which values change with time, and
that without that change, there would be no TSS explanation for profits. I
don't see that as being in the spirit of Marx's economics, and here again I
concur with Allin:

>There is, however, an alternative view on which Marx's two
>equalities do hold (regardless of dynamics and all that).  This
>is the view Andrew and Alan Freeman defend.  It requires that we
>conceive of the "value transferred to the product by the means
>of production" not in the "standard" way, as the socially
>necessary labour-time required to produce the means of
>production, but rather as the price of the means of production
>divided by the economy-wide MELT.  (I think this claim
>fundamentally breaks the labour theory of value and I can't
>accept it.)

>If you take this view, it simply doesn't matter whether the
>means of production are assumed to be priced "at their values"
>in the initial transformation tableau, or at prices of
>production, or at arbitrary market prices.  Marx's single-step
>transformation needs no further adjustment because the value
>transferred by the means of production is itself a function of
>the prices of those means of production.

>I think you have to choose.  You've said several times that some
>further adjustment is called for due to the fact that Marx's
>inputs are assumed to be priced at value, but you refuse to
>follow out the logic of that admission.  Well then, consider the

Dr. Steve Keen
Senior Lecturer
Economics & Finance
University of Western Sydney Macarthur
Building 11 Room 30,
Goldsmith Avenue, Campbelltown
PO Box 555 Campbelltown NSW 2560
s.keen@uws.edu.au 61 2 4620-3016 Fax 61 2 4626-6683
Home 02 9558-8018 Mobile 0409 716 088
Home Page: http://bus.macarthur.uws.edu.au/steve-keen/

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