[OPE-L:4406] Re: Re: Re: Re: Technical change and general truths

From: Rakesh Narpat Bhandari (rakeshb@Stanford.EDU)
Date: Wed Nov 01 2000 - 15:10:31 EST

So this is what Sweezy should have said to Bortkiewicz (assuming he 
was still alive).

Marx could not have had the inputs in prices of production because 
that category is not even logically derived until the completion of 
the transformation tableau.

You seem not to understand the logically rigorous and systematic 
manner in which Marx's explanatory concepts are derived. This first 
rate philosopher was not illogical.

Marx of course himself pointed out that our calculations would go 
wrong unless the inputs are also modified and  the cost prices 
thereby modified.

You seem to make the fantastic assumption, derived from equilibrium 
thinking, that the inputs should then be transformed into the same 
prices of production as the outputs. This is implicit in the way you 
put Marx's transformation tableau back into a simple reproduction 
scheme, forgetting that inherent in the latter are constant values 
which was an unrealistic assumption Marx only made to simplify the 
study of the realization of capital. The assumption was not meant as 
a controlling methodlogical postulate to be reintroduced in the 
analysis of any economic problem. In a recent mss by Henryk Grossmann 
which unfortunately was suppressed by Max Horkheimer, there is a 
rather spirited attack on the rise of equilibrium thinking in 
economics. I intend to pay careful attention to all his work and the 
studies by his students William J Blake and Paul Mattick, not yet Sr 
for a few more years.

For the sake of argument I will still play this game with you, though 
it is somewhat unbecoming for a Marxist.

Now note that Marx has three, not two, equalities

sum of value=sum of production prices
sum of value minus sum of cost prices=sum of surplus value
sum of surplus value=sum of profits.

You want to follow through on Marx's insight on the need to transform 
the *prices* of the inputs.

Well, that means we are not going to change the direct and indirect 
labor embodied in the commodity output, so we will have to keep total 
value invariant.
The same total value from the unmodified scheme will thus have to 
equal the sum of prices of production in the the modified scheme as 

Now by transforming the prices of the inputs, you will modify cost 
prices which necessarily means that you will modify the sum of 
surplus value and thus the average rate of profit determined in terms 
of it ( which is now modified sum of surplus value/modified cost 
prices). The sum of surplus value and thus the rate of profit will 
not remain invariant in the transformation.

However, in the transformed scheme, the sum of profits must still 
equal this modified sum of surplus value.

This problem gives us the set of equations which Rakesh has helpfully 
given us (his mathematical skills are something to be wondered at).

Once we solve for these equations in which all three equalities are 
indeed maintained, we do find that Marx was correct that if the cost 
prices are not modified, it is possible to go wrong in the 
determination of the profit rate and prices of production.

So my thanks to you for spurring us on in formalizing this rather 
minor insight of Marx's.

Since all of Marx's equalities hold in this demonstration even on 
your own absurd equilibrium assumptions, there is no transformation 
problem which we will need the sterile formalisms of neo Ricardianism 
to solve. I am glad that you did not trick me into opening up a can 
of worms which would eat out the insides of Marxian theory for 60 

All the best, Rakesh

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