[OPE-L:4473] adding up theories of price

From: Rakesh Narpat Bhandari (rakeshb@Stanford.EDU)
Date: Tue Nov 07 2000 - 03:14:20 EST


even if I have failed to convince you of anything at this point, I do 
hope that you will consider the implications of the famous Ricardian 
critique of Smith's adding up theory of prices which had allowed for 
the greater payment for (direct and indirect) labor to result in 
rising total prices, rather than falling profits (see TSV II). You 
have the expertise do so.

You are clearly doing a Smithean thing. After the equalisation, the 
relative prices of Depts I and II rise; since their output is the 
input for the system,

total cost (price) rises; then you just tack on the same old surplus 
(1000>875) though the value of the output (the indirect and direct 
labor which it embodies) has remained unchanged since in the 
transformation we alter only the outward price appearances of this 

For the life of me, I cannot understand how Bortkiewicz, Sweezy and 
you could think that in Marxian terms rising costs in themselves 
could result in rising prices.

A few weeks ago in private correspondence, I suggested that you were 
ensnared in an adding up theory of price. I simply think you are 
evading the issue by dismissing my own argument as tautology. 
Whatever the faults of mine, yours surely has no basis in Ricardo or 

You are not alone. Consider Duncan's example. After the equalisation 
of profits, the price of steel rises relatively; he then transforms 
the steel input and thereby modifies cost price upward to which he 
adds on the same old value added, resulting in higher total prices 
again simply from higher costs alone since in his example as in yours 
the value of the output has not risen.

It seems to me that both you and Duncan are implicitly assuming an 
adding up theory of price since you both allow for a rise in costs 
and costs alone to engender rising prices.

Well you may say then that ditching the adding up theory of price 
will only mean that in the transformed system the sum of profit is no 
longer the same as the sum of profit in the original tableau.

I would be happy if we could carefully probe into why this 
mathematical result obtains and whether it in any way undermines the 
thesis that the profit which is appropriated derives entirely from 
the unpaid newly added value by labor.

Yours, Rakesh

This archive was generated by hypermail 2b29 : Thu Nov 30 2000 - 00:00:05 EST