[OPE-L:4578] Re: Re: Re: Re: Re: Re: reply to Fred (1)

From: Rakesh Narpat Bhandari (rakeshb@Stanford.EDU)
Date: Mon Nov 27 2000 - 04:28:45 EST

re 4576

Dear Fred,

I do some set up here; you can jump ahead to where I have capitalized 
YOU THEN WRITE; I have made only a partial reply here.

As you have helpfully pointed, out, I have been arguing that Marx has 
assumed that cost price of a commodity is

(1) k =  m (Lmp + Lms)

m is the monetary expression of labor value; Lmp and Lms the labor 
value of the means of prod and means of subsistence respectively,

Its price is

(2) P = m (Lp + Lc)

Lp is the labor value of the used up means of production themselves 
and Lc is current labor or newly added value (which Marx breaks down 
into v and s).

Surplus value is defined as:

(3a) dM = M' - M
(3b) dM=  P - k

In Vol 3, Ch 9, Marx reveals that only a commodities produced by 
capitals of average organic compositions can exchange at prices 
determined by m (Lp + Lc).

"Only for capitals such as I, in branches of production whose 
composition chanced to coincide with the social average, would the 
value and the price of production be the same." Capital 3, p. 264.

Once Marx has dropped the assumption of exchange at value or prices 
proportional to value (with m as the factor of proportionality) and 
transformed values into prices of production, Marx notes that the 
"development given above also involves a modification of a 
IN ITS PRODUCTION." (capital 3, p. 264; emphasis as asterisked 

This suggests to me that  after Marx has demonstrated why the outputs 
exchange at prices of production, rather than prices proportional to 
value, he now reveals the need to drop the assumption that 
commodities consumed in the production of commodities exchanged at 
prices determined by or proportional to their values.


"As I have argued before, I don't think Marx said that he failed to
transform the cost price (C and V).  Rather, I think he said, in
effect: now we can see that the given cost price (the "given
precondition"; C.III. 265) is not equal to the value of the means of
production and means of subsistence (as provisionally assumed up to this
point), but is instead equal to the price of production of the MP and
MS.  The given cost price remains the same, but we now understand more
fully the determination of this given amount."

This simply can't be right.

Take the example of leather boot making (Marx seems to have been into 
leather).  Now let us say that the bootie capitalist bought the awls 
and leather at prices of production *below* their value.

How would we then know the (M' minus M) represented by boots derived 
from the unpaid  labor of the bootmaking proletariat  rather than 
value which has simply been *redistributed* from the used up awl and 
leather to the boots?  How would we know the boots represent newly 
produced surplus value, instead of redistributed value?

This is why Marx has assumed that all exchange at prices determined 
by (or proportional to) value.

it is not merely a mental assumption but a controlling assumption in 
Marx's gedanken experiment.

"The transformation of money into capital has to be developed on the 
basis of the immanent laws of exchange of commodities, in such a way 
that the starting point is the exchange of equivalents. The money 
owner who is yet only a capitalist in larval form must buy his 
commodities at their value, sell them at their value, and yet at the 
end in the process withdraw more value from circulation than he threw 
into it at the beginning." (capital 1, p. 268-9). Also note: "...we 
are excluded from considering it here by our assumption that all 
commodities, including labor power, are bought and sold at their full 
value" Capital I, p. 431.

  Marx then drops the *controlling* assumption of exchange at full 
value for the outputs and then the inputs in vol 3.

The assumption of exchange at value  is an important simplfying 
assumption to (a) isolate surplus value as derived from unpaid direct 
labor so as to lay bare the relations between the classes (we of 
course have the Cassini-Skillman critique on this point) and (b) 
concentrate on the analysis of the relations between variables in the 
determination of the magnitude of surplus value (dM/M = (s/v)/[(c/v) 
+ 1)].

In volume 3 we discover that only commodities produced by capitals of 
the average organic composition exchange at prices determined by (or 
proportional to) their value.

In my opinion Marx was correct to leave the second tableau as he did 
(Capital 3, p. 256). It is impossible on the basis of one period of 
data to determine how the prices of the the input means of production 
and subsistence deviated from their values at t0. For this we need 
the data for t-1 to t0.

It makes no sense in Marxian terms to suppose that the unit prices of 
production would be the same for the inputs as the outputs. So after 
Marx transforms the outputs from simple prices to prices of 
production, he tell us that the input means of production and 
subsistence had to have also sold at some deviation from their value, 
so that the actual cost prices of the commodities could not have been 
as his tableau indicates. We thus go wrong if we ever suppose, as 
Marx himself has been supposing,  that the cost price of commodities 
is determined by m (Lmp + Lms).

Again Marx is unequivocal:

PRODUCTION." Marx's emphasis, capital 3, p. 364.

However whatever the actual cost price turned out to have been, it 
was a given precondition for the determination of prices of 
production. Marx's calculation procedure remains exactly the same

(a) total price minus modified cost cost price = modified sum of surplus value
(b) modified sum of surplus value/ modified total cost price = modified r
(c) (modified r) (respective modified cost prices) = respective 
modified profits
(d) respective modified cost prices + respective modifed profits= modified
       prices of production

Marx's main focus remains the distribution of value through prices 
here. We already know from vol I that step (a) will almost always 
yield a sum substantially greater than zero due to exploitation of 
the proletariat.

  However,  unless we allow for the modification of cost price, we 
will go wrong in the determination of r and prices of production. 
Marx says so himself in clear terms. You deny that Marx is saying 
this. We have a different interpretation of Capital 3, p. 264-265

I argue that the quantitative modifications from the transformation 
of the inputs is of absolutely minor significance; Marx has already 
demonstrated his main point: far from contradicting or modifying the 
law of value, the average rate of profit has become the form in which 
it asserts itself.

Moreover, I argue that we cannot determine the  prices of production 
of the commodities consumed in the production of the outputs from 
this one period of data. To do so is to excise dynamics from the 
formalisation of Marx.

Following Shaikh and Gouverneur in very rough form, I do argue that 
it is possible however to extend Marx's transformation algorithm to 
the inputs if we are going to assume the Bortkiewicz-Sweezy simple 
reproduction model  (though I do not think vol 2 simple reproduction 
should be married to vol 3 transformation because it smuggles in too 
many vol 2 assumptions which have been relaxed, viz. constant value, 
annual turnover of fixed capital) .

  It is possible to use Marx's transformation procedure to arrive at a 
determinate vector of equilibrium prices of production while 
maintaining both equalities. We will have here a case where the unit 
input prices of production are identical to unit output prices of 
production. This is the kind of thing that turns bourgeois economists 
on, so I am hoping that a demonstration that Marx's transformation 
procedure can yield such a result will silence them.

I have not found Allin's counterargument that the second equality, 
viz, the sum of surplus value equals the sum of profit, would not be 
preserved in the iteration which I propose very persuasive or 
substantial. Do note that Allin has not even clearly set out his 
definition of surplus value while continuing to maintain that the sum 
of surplus value will not be equal to the sum of profits in the 
iteration which I propose. He is said that what I would do is even 
worse. Why? Than what?

Yours, Rakesh

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