[OPE-L:4451] Re: Re: Re: two schemes?

From: Rakesh Narpat Bhandari (rakeshb@Stanford.EDU)
Date: Sun Nov 05 2000 - 15:56:01 EST

re 4447

let me try to respond to the more substantive comments which you tried to make.

>I have a feeling that you have never studied either economics or 
>mathematics as a
>student, and that's why you don't understand simple arguments. As long as the
>assumption that relative prices of commodities are proportional to 
>their direct and
>indirect labor time units, which is what Marx explicitly assumes till the
>transformation problem is broached, it does not matter whether the 
>value numbers
>are given in labor units or the units of any commodity taken as the 
>money commodity

Well if we want to the know the labor values of those input 
commodities, we would have to know the 1/M by which they had been 
multiplied. Which means we would have to know the value of money. 
Luckily, Marx fixes it for us.

>(By the way, if you have read Marx then you would know that his money is a
>commodity and not your green dollars--so your earlier example simply 
>cannot be a
>faithful representation of Marx anyway).

Yes, his money is a commodity, but unlike other commodities, Marx has 
to hold the value of money constant throughout his analysis (which 
means that he fixes the monetary expression of labor time as well). 
Why this is so is crucial to an understanding of his theoretical 

Let me draw on a well known authority to have this explained to you:

Through prices the fluctuations of a given capital in the course of its
circuit become expressed in money, which serves as measure of value
required for accounting. And with respect to this measure of value Marx
proceeds from the  assumption, which is purely fictitious and which forms
the basis of his analysis, that the value of money is constant. At first
sight this appears to be all the more suprising in the sense that, in his
polemic with Ricardo's 'invariable measure of value,' Marx emphasizes that
gold can only serve as a measure of value because its own value is variable.
But science needs invariable measures: 'the interest in comparing the value
of commodities in different historical periods is, indeed, not an
*economic* interest as such, but an academic interest.' (Marx)

"From the historical surveys of the development of thermometry we know that
a reliable measure of heat variations was established through the
fundamental work of Amonton, with the discovery of two fundamental points
(boiling point and the absolute null point of water) for liquid used as the
measure of heat variations. This alone could establish the constant
reference points with which it became possible to compare the variable
states of heat (Mach)

There are no such constant reference points for gold as the measure of
value. So an exact measure of the value fluctuations of commodities would
be impossible. On the one hand changes in the value of the money commodity
may differ from the changes in the value of individual commodity types. In
this case we have no exact measure to ascertain how far, say, the rising
prices of a given commodity have been caused through changes in its own
value and how far through changes in the value of the money commodity. In
this case, suppose we were studying variations in the magnitude of surplus
value; ten, with a variable value of money, it would be difficult to tell
whether a given increment in value (or price) was not something merely
apparent and caused purely by changes in the
value of money.

'In all these examples there would however have been no actual change in
the magnitude of capital value, and only in the money expression of the
same value and the same surplus value...there is, therefore, but the
appearance of change in the magnitude of employed capital.' (Marx)

Alternatively the value of money varies in the same proportion as the
values of other commodities, for instance due to general changes in the
productivity--a limiting case that is scarcely possible in reality. In that
case there would have been enormous absolute changes in the real relations
of production and wealth, but these actual changes would be invisible on
the surface, because the relative proportions of individual commodity
values would remain the same. The price index would not register the actual
changes in productivity.

Thus it was entirely valid for Marx to substitute the 'power of
abstraction' for the missing constant reference points, so falling into
line with Galileo's principle: 'measure whatever is measurable, and make
the nonemeasurable measurable.' For instance to ascertain the impact of
changes in productivity on the formation of value and surplus value, Marx
is forced to introduce the assumption that the value of money is constant.
This assumption is therefore a methodological postulate that equips Marx
with an exact measure for ascertaining values of industrial capital during
its circuit. It is an assumption underlying all three volumes of Capital.

>  But once it is admitted that relative
>prices are not proportional to direct and indirect labor time units, then the
>question of the measuring rod and the condition of its stability 
>becomes a serious
>theoretical problem. You, and your friends, need to understand this 
>point before taking any further step.

Well, Ajit, this is the fundamental point above. The question of the 
measuring rod and its stability has been a serious theoretical 
problem from the very beginning, not at the point of the 
transformation.  This is why Marx has to turn money into a purely 
fictitious constant reference point by holding the value of money 
constant (and thus the monetary expression of labor time as well). 
Without the pure invention of such stable measuring rod, Marx would 
not be able to conduct a purely theoretical analysis of capital. 
Money is thus not subjected to the same vicissitudes as other 
commodities, the transformation process included.

>  The quotation is from chapter 3, where the assumption that
>relative prices are proportional to labor-values are throughout 
>maintained--so the
>above assumption, and mind you this is taken explicitly as an assumption, is
>absolutely consistent with Allin and my position.

If the constant value of money has not been the assumption throughout 
Capital, how else could have Marx been able to establish that surplus 
value results from the greater value of the outputs over the inputs; 
he simply has to rule out an explanation by a change in the value of 
money, i.e., fix the value of money as constant.

>  The relevant problem for our case
>only begins in chapter 9. As a matter of fact, this chapter is only 
>concerned with
>showing some comparative static relationships between the rate of 
>profit and the
>rate of surplus value.

Let's have a separate thread on whether or how Marx used the method 
of comparative statics.

>For the arguments in this chapter, not only the value of
>money is held to be constant but also turnover time, productivity of 
>labor, length
>of the working day, intensity of labor, and wages, etc. are also 
>held constant. So
>if we go by your way of reasoning, then not only we will have to rule out your
>argument against Allin that technology, that is productivity of labor, keeps
>changing during the transformation process will have to be rejected 
>tout court but
>also that many of Marx's theoretical work relating to changes in 
>technology, length
>of the working day, intensity of work, wages, etc. will have to be 
>expunged, since
>according to you they all must be taken as constant in all 
>circumstances in Marx's

I don't follow the argument.

>It simply cannot remain fixed and constant once you move from 
>labor-value price
>proportionality to their none proportionality. This is a theoretical problem
>needing a solution, and the core of the transformation problem. You 
>don't solve a
>problem by assuming that it does not exist. Just like you cannot open a can by
>assuming that you have a can opener. Try opening a can with an 
>assumed can opener,
>and you will know what I'm talking about. Cheers, ajit sinha

If Marx has constructed money as a constant reference point, why can 
it not remain exactly that after the transformation or any other 
change? I do not understand your argument. Please explain.

Yours, Rakesh

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