[OPE-L:4564] Re: Re: reply to Fred (1)

From: Rakesh Narpat Bhandari (rakeshb@Stanford.EDU)
Date: Wed Nov 22 2000 - 13:56:30 EST

>Hi Rakesh,
>I want to respond to what you have called your "main point" in your
>critique of my interpretation of Marx's theory.  You seem to think that,
>according to my interpretation, the magnitude of the cost price will
>change as a result of the transformation of values into prices of
>production.  This change of the cost price necessitates a choice between
>two "invariance conditions":   either total value = total price of
>production or total surplus-value = total profit.  You argue for the
>former condition, and argue that the latter condition implies an "adding
>up" theory of value (i.e. that an increase in the cost price causes an
>increase in total price).


I know you are not interested in this, but let me defend myself with amendment.

(1) Total price = total value x E
(2) Total value =Total price/E

Following Gouverneur, E is the monetary expression of labor value.

At no point in the transformation do we change the hours necessary to 
produce the aggregate output.

so there can be no doubt about this invariance condition

sum of simple prices/E1 = sum of prices of production/E2

Any solution which does not maintain this is not in the spirit of the 
Marxian system. I don't think the new solution maintains this 
invariance condition, so I would reject it as an interpretation of 

I have assumed for the reasons that Grossman gave that value of 
money/monetary expression of labor value is held constant by Marx so 
that E1 = E2. It seems to me that in ch 9 Marx assumes that the unit 
of account remains an hour of labor time, so this would allow us to 
set the sum of simple prices equal to the sum of the prices of 
production, as Sweezy initially did and Winternitz did.

But this is not necessary. In the Bortkiewicz-Sweezy solution E 
rises. Sweezy is correct that the reason the price sums are not equal 
is simply because of a change in the value of the unit of account.

Sweezy argues that the problem arises because of the change in ratio 
of surplus value to cost price or r.

In their transformation cost price rises because the two depts 
together which produce the inputs for the system as a whole have a 
higher average OCC than the third dept; the equalisation of the 
profit rate thus raises the prices of Dept I and II's ouputs and thus 
the prices of the inputs and the cost prices in the system as a whole.

Allin is correct that I am giving a different gloss to their 
solution. I argue that the labor theory of value itself implies that 
if cost price rises relative to the total, then surplus value must 
fall relative to the total. So the fall in the rate of profit does no 
damage to the labor theory of value. If for example after the 
transformation, total price had to be resolved entirely into the 
raised cost price, leaving nothing for surplus value, then the 
transformation procedure would have collapsed upon completion. But 
the point is that paid (indirect and direct) labor or cost price 
remains less than total value or price after the complete 
transformation; total profit remains derived entirely from unpaid 
labor. There is not a chink in the theory of exploitation.

Yours, Rakesh

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