[OPE-L:4214] Re: Re: Logic and illogic indefending Marx

From: Rakesh Bhandari (bhandari@Princeton.EDU)
Date: Sat Oct 21 2000 - 19:09:46 EDT

Steve wrote:

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.
Keynesianism and especially post Keynesianism are in theoretical shambles:
it cannot explain the US upcycle in conditions of fiscal austerity any more
than it can explain the ineffectiveness of the ballooning Japanese deficits
any more than it has an explanation for its demise into staglation 25 years
ago.   And post keynesianism has no influence today on the making of public
policy at this time. The Maastrict criteria, the rise of the US deficit
hawks, and the tightness of the Japanese central bank all spell the
practical death of post Keynesianism.  Post keynesianism is truly a
marginal academic cult at this point with no constituency in the working
class and no hold on power. 
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...

Steve, perhaps you have not noticed that Marxists as critics of political
economy have been routed from the academcy of course on the ostensible
grounds of a fatal logical error in the transformation procedure. This
makes difficult theoretical development. 
 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.
Well Steve at least you are no longer saying that labor is the source of
the surplus or wealth but recognize that it is indeed a labor theory of
value. At any rate, Mattick Sr did predict the mixed economy going up in
stagflationary ashes. That was a good, solid complex analysis which was not


Steve then says:

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.
I don't think so. All we have to do is allow for there to be small
reasonable interperiodic changes in unit prices of production as a result
of rising labor productivity for the two equalities to hold in each
successive period.  Paul C indicated that he had understood this by saying
that it's not enough to demonstrate the transformation in the special case
of extended reproduction. And I replied that this is not the special case
but the typical case. And that simple reproduction or equilibrium prices
are not only special cases, they are of no real theoretical interest. 

All the best, Rakesh

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
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