[OPE-L:4559] Re: Re: transformation

From: Rakesh Narpat Bhandari (rakeshb@Stanford.EDU)
Date: Wed Nov 22 2000 - 00:55:44 EST

Allin wrote in 4557:

>I believe (subject to correction by Paul) that he and I share a
>common view of the transformation issue.  Namely, that Marx's
>analysis is incomplete (the inputs not being transformed) and
>that once it is completed Marx's "two equalities" don't hold in
>general, but that this is not a very big deal since the rate of
>profit is not equalized and market prices are as close to values
>as to prices of production.

The first equality states that total price is determined by the 
product of total value and the monetary expression of labor value. 
Since we are not going to change either term in the transformation 
exercise, the first equality is also an invariance condition: since 
the the number of hours necessary to produce the aggregate output and 
the value of money are unchanged in the transformation,  the sum of 
simple prices should be set to equal to the sum of prices of 
production. Winternitz was correct that this proposition is obviously 
in the spirit of the Marxian system.

The second equality states that the sum of surplus value determines 
the (maximum) sum of capitalists' profits.

I argue that the second equality is indeed maintained if one uses 
Marx's definition of surplus value; however, not only do I argue that 
both equalities are not invariance conditions, I argue that it is 
grossly antithetical to Marxian theory to hold the sum of surplus 
value or profit invariant in a complete transformation exercise in 
which total price is held constant while cost price is modified on 
the basis of the transformation of the inputs. Allin makes no contact 
with my argument.

Imre Lakatos defines the concept (I believe) of proof generated 
definitions. I could say that it is perfectly acceptable to choose 
definitions which preserve theorems. That is, in order to preserve 
the "second equality" or theorem that the sum of surplus vaue 
determines the sum of individual capitalists' profits,  I could 
choose my iteration-generated definition of surplus value as total 
price minus cost price.

But I am not going to say this because I did not choose a definition 
of surplus value so that theorem of the the determination of the sum 
of profit by the sum of surplus value would be preserved in a 
complete transformation. The definition of surplus value which I use 
derives from Marx's acceptance of Ricardo's critique of Smith's 
adding up theory of price.

Allin seems not to have recognized this.

>By the way, Rakesh's new view seems to me substantively
>indistinguishable from Bortkiewicz/Sweezy.  There's nothing in
>the B/S approach that _necessitates_ holding total profit =
>total surplus value rather than total value = total price, as
>Rakesh prefers.  So hold total price = total value in the
>transformation.  Then, in general, total profit diverges from
>total surplus value (as determined in the "original" table).
>Rakesh seems to accept this result; he just wants to gloss it
>differently from B/S, by saying that "total surplus value"
>changes in the course of the transformation.

You defined surplus value as total value or price minus the value of 
the inputs. On the basis of textual support which included your own 
putatively uncorrupted quotation, I define surplus value as total 
value or price minus cost price (dM= M' minus M). You suggested that 
Marx  only held to the latter when he had assumed that the inputs 
sold at prices determined by value.

Given your definition, surplus value and cost price cannot remain 
resolved, antagonistic components of total value but rather become 
(at least partially) independently determined magnitudes. You have 
glossed over my criticism.

Ricardo allowed for the possibility of the price of wage goods 
rising due not only to their increased value as greater outlays of 
labor are needed for agricultural produce with the increasing 
cultivation of inferior lands but also to rising ground rent payments.

Now as long as we are assuming that total value and the value of 
money remain constant,  you would allow surplus value to be 
diminished only by the rise in the value of wage goods, not the rise 
in ground rent as well.  To this only partially diminished surplus 
value you would then add on the increased cost price.

So if we stick to your definition of surplus value--total value minus 
the value of the inputs--the sum of your (only partially modified) 
surplus value and (raised) cost price  would in this case no longer 
be the total price, as determined as the product of the value of the 
output and the monetary expression of labor value both of which we 
are assuming to be constant. You are led to break the labor theory of 
value here.

  If we have price determined by your sum, then a rise in cost alone 
has not lead to diminished surplus value alone but rather to 
partially higher prices. That is, your definition leads you to accept 
Smith's adding up theory of price. This is grossly antithetical to 
Marx's theory. Your definition of surplus value cannot be accepted as 
Marx's. Moreover, your textual support is weak.

However, once we accept the definition of surplus as total value or 
price minus cost price, it becomes obvious that any modification of 
cost price--whether it results from the rising value of the inputs or 
increased ground rent or the transformation of the inputs--implies an 
inverse change in the mass of surplus value as long as we are taking 
the value of the output and the value of money to be fixed magnitudes 
(which is exactly what Sweezy inititally did before he decided it was 
too mathematically complicated a problem).

  Once we accept the challenge of transforming the inputs  in terms of 
a vector of equilibrium prices--which I am only doing for the 
purposes of argument--we have a more complicated problem at hand than 
B-S-M realized. The problem now is to have the mass of surplus value 
modified in inverse direction to the modification of cost price 
consequent upon the transormation of the inputs while at the same 
time having the sum of Dept profits determined by this (modified) 
mass of surplus value. If this can be done, then the second equality 
can be preserved. The first equality is already given by stipulation.

This also means that there is no way to reduce the set of equations 
to  three with three unknowns, as Sweezy had hoped for the purposes 
of mathematical tractability. I am happy to find however that the 
four equations which I propose are happily neither over- nor 

Yours, Rakesh

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