# [OPE-L:4231] Part Two of Volume III of Capital

From: Rakesh Narpat Bhandari (rakeshb@Stanford.EDU)
Date: Sun Oct 22 2000 - 22:42:42 EDT

```Allin,

Value table (same as before):
c	  v	  s     value
I  225.00   90.00   60.00   375.00
II  100.00  120.00   80.00   300.00
III   50.00   90.00   60.00   200.00
Tot.  375.00  300.00  200.00   875.00
_______________________

I am NOT assuming simple reproduction; for me this tableau has to be
seen in terms of a realistic sequence, characterized above all by
rising labor productivity.

So then what do we have here? Let us assume each unit of output value
represents a natural unit of the good. So we have 375 mp. 300wg, 200
lg in their natural units.

Now let us assume productivity has increased 5% this period. What
does this mean?

It means that the inputs represent 357 natural units of mp and 286
natural units of wage goods.

else follows easily.

You and Steve have yet to understand what I am doing.

Now take Marx's transformation

c	  v	  s     price   pvratio
I  225.00   90.00   93.33   408.33   1.0889
II  100.00  120.00   65.19   285.19   0.9506
III   50.00   90.00   41.48   181.48   0.9074
Tot.  375.00  300.00  200.00   875.00   1.0000

OK what do we have to do now? We have to figure out what individual
and total cost prices would have been had the inputs totalling 357
and 286 natural units of the mp and wg, respectively, sold at their
prices of production. Modifying the cost prices will necessarily
modify the output Div prices even if r were to remain the same.

Marx never followed through with the consequences of transforming the
inputs. I do agree.

So we have:

mp: 357 unitsx1.05unit value
wg: 286 unitsx1.05unit value

But we know that mp sold above and wg below value or vice versa at t0
as a result of the above tableau.

So we need PV ratios, we need to transform the inputs.

Now we have unit prices of prod for the outputs because of the one
unit of value/one natural unit of the output assumption which I made;
let us suppose as well that unit prices of production were higher at
t0 than at t+1. It is a more than a reasonable assumption to make if
we are allowing for the reality of rising productivity while holding
the value of money constant.

This gives us some indication of the unit prices of production into
which the inputs have to be transformed.

Now I just did a quick calculation. Let us say that the unit price of
production was 1.12 for the input mp as opposed to 1.09 for the
output mp (1.09 is the rounded  PV ratio above) .

If we hold total cost price constant, this means the unit input price
for the wg would have been .96 instead of .95 as with the output.

That is, we now have 400 +275 for the transformed inputs which in

This of course means the cost prices for each of the industries will
now be modified on the basis of the unit input prices of production.

So for Div I, k in price of production terms now becomes  322 (c+v=
240+ 82) instead of 315 (225+90); unit output price of production now
declines to 1.1 from the input unit price of production of 1.2 if we
keep r at 1.29.

k for Div II in price of production terms becomes 217, instead of 220
as it was in the value scheme.

Of course if we modified cost prices for all three divisions, we'll
end up with the same total cost price as before and thus the same r
and thus the same total krs. This is built into my assumptions.

I liked this easy result because it showed what seemed to me a
reasonable decrease in unit prices of production over the period. It
is obvious we can constrain the the changes in unit prices of
production over the period to small, reasonable, realistic, even
statistically insignificant changes.

Now Steve is absolutely correct that I am just playing with numbers
here. Why not allow total cost price to change when the inputs are
transformed? No reason except that it would allow me to keep r the
same, and we could see how little it could matter for the value
theoretic determination of r that the inputs are transformed.
Moreover, I have shown that it could be interesting if we treated the
transformation tableau not in terms of simple reproduction but rather
as one period in a realistic sequence.

But you object on other grounds:

_________

"No, when the assumption of increasing labour productivity didn't
"do the trick" you introduced the additional assumption that the
_value_ of the means of production carried forward had
assumption, which implies only that the physical quantity of
means of production carried forward would be greater than that
used up at the outset.  The value of means of prod carried
forward can increase only if the rate of surplus value increases
or there is more labour employed.  Either of these assumptions
would, as I said, simply "change the subject" by altering the
value system that we were trying to transform to prices of
production."
____________

But you will see that you are absolutely wrong--I truly hope that you
admit this; the value of the means of production remains 375 for both
the inputs at t0 and the outputs at t+1. Where in the above did I
change this?

What has happened is that we have modified (c+v's) for each of the
three branches in accordance with the unit prices of production *for
the inputs*.

This means the krs or output price of production will change for
each department as well.

The total prices of production for the input mp and wg will not equal
the total prices of production for the output mp and wg, respectively.

For example, the sum of the output price of production for the means
of production is now about 415 while the sum of the input price of
production is only 400. 415 is the price of prod for the 375  natural
units of mp at t+1; 400  is the price of production for the 357
natural units of mp at t0.

But the total value of both remains 375. Now you may reply that it is
unreasonable for the same value of mp to have two different prices of
production  as inputs and outputs.

And you would be correct of course if we were still assuming simple
reproduction but we are not! I am on my way to expanded reproduction.
This is my point, and I truly don't see what is so difficult about
it. Please respond to what I am saying.

There are three important things to note here.

1. The system is not incoherent, for the unit prices of prod are not
changing unrealistically. In fact they are changing just as we should
expect with rising labor productivity and a constant value of money..

2. Since we have not changed the total cost price or the total value
in the system, the r in the system will remain the same.

3. there will be more total value/price at t+2 than there is at the
completion of this period, t+1.

This is primarily because  the *physical quantity* of the means of
production and *the number of workers* carried forward increase.  Not
the value as you say.

This conclusion follows simply from Marx's analysis:

...the development of labour productivity contributes to an increase
in the existing capital value, since it increases the mass and
diversity of use values in which the same exchange value is
represented, and which form the material substratum, the objective
elements of this capital, the substantial objects of which constant
capital consists directly and variable capital at least indirectly.
The same capital and the same labour produce more things that can be
transformed into capital, quite apart from the exchange value. These
surplus labour also, and can in this way form additional capital. The
mass of labour  that capital can command does not depend on the its
value but rather on the mass of raw and ancillary materials, of
machinery and elements of fixed capital, and of means of subsistence,
out of which it is composed, whatever their value may be. SINCE THE
MASS OF LABOUR APPLIED THUS GROWS, AND THE MASS OF SURPLUS LABOUR
WITH IT, THE VALUE OF THE CAPITAL REPRODUCED AND THE SURPLUS VALUE
NEWLY ADDED TO IT GROWS AS WELL.  Capital 3, p. 356-7. vintage

That is, total value/price increases at t+2 from t+1 because of the
greater quantity of use values at t+1 allows more labor to be
absorbed in the following period. You will see that I have made this
point twice to you. That is, I twice said that since at t0 we only
had 286 wage goods, only 29 workers could be hired (assuming ten wage
goods are needed for a working year); their labor hours are absorbed
into the output at t+1.

But since at t+1 we now have 300 wage goods, more labor hours will
go into the output of t+2 (30 working years) , and for this reason
total value will be greater than at t+1.

All the best, Rakesh
```

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