[OPE-L:4641] Re: money and the transformation

From: Rakesh Narpat Bhandari (rakeshb@Stanford.EDU)
Date: Thu Dec 07 2000 - 17:40:29 EST

re Allin's 4640

>On Thu, 7 Dec 2000, Rakesh Narpat Bhandari wrote:
>>  >>  Well, let's assume that each monetary unit simply represents
>>  >>  .5 labor hours.
>>  >
>>  >That's precisely what you "simply" cannot do, if there's a
>>  >transformation going on and money is a commodity.  As Paul
>>  >suggests, maybe you can do it with fiat money.
>>  But if money is a commodity, its value is variable; yet it remains
>>  invariable even though technical change is going on. So, having made
>>  this heroically fictitious assumption earlier,  why can't Marx
>>  continue to assume that the money commodity invariably commands, say,
>>  .5 hours of labor in the transformation as well?
>It's a different order of assumption.  He can continue to assume
>that the quantity of the money commodity corresponding to the
>monetary unit takes .5 hours to produce, but if he assumes it
>continues to command or "represent" .5 hours in exchange he's
>appealing to the deus ex machina of a commodity that's immune to
>the transformation.

Yes but he already appealed to a deus ex machina to keep the value of 
a variable thing invariable in the first volume. Why does God fail us 
in the third volume? More serioulsy, why would Marx abandon his 
constant reference point in the third volume?

>However, I think it's quite legitimate to analyse the
>transformation in terms of a fiat money (although Marx himself
>probably wouldn't have liked that; he was very insistent on the
>claim that money ultimately has to be a commodity).
>The commodity money business is why -- I think -- Bortkiewicz
>and Sweezy held to the equality of total profit and total
>surplus value.

This is the confusion to which I pointed earlier. Bortkiewicz seems 
to posulate the equality for reasons of sticking to the commodity 
money business; Sweezy does it because he doesn't want to go ahead 
with four equations, four unknowns and justifies setting Dept 3's 
multiplier at 1 because from a mathematical point of view this is 
"simpler and hence more attractive"; Meek argues that this should be 
the invariance condition because it represents in some sense Marx's 
most fundamental claim. There is massive confusion in the literature.

>  In the toy example I gave earlier there are 3
>departments and simple reproduction is going on.  If one of the
>departments is producing the money commodity, it must be dept 3.
>Now, this money is taken as the numeraire: its price is
>identically 1.0.  But dept 3 has an organic composition below
>the average, and in the transformation a department in such a
>position would ordinarily see its price fall.  Since the price
>of money _can't_ fall, the only way to have the profit rate
>equalized for all 3 sectors is for the _general_ level of prices
>to rise.

Yes total price rises because as the sum of surplus value stays 
constant in absolute terms, the cost prices are raised since the 
prices of the inputs are raised as a result of the transformation. So 
in the iteration which you proposed a rise in cost price 
alone--without any mention of change in the labor commanded by the 
unit of account -issued in higher total prices.

You had (k+a) + s => C + a, without any change in the labor value of 
the output or the unit of account--at least as I understood what you 
were proposing.  Which led to my criticism of an implicit adding up 
theory of price. I argued that (assuming the simultaneous game in the 
conditions you laid out) the formula should have been C=> (k+a) + 

>  Money "stays put" at a price of 1 while the rest of
>the economy adjusts around it.  Since money production = dept 3
>= the surplus, total profit remains equal to total surplus
>value, while total price comes to exceed total value.

Of course to ease comparison with the previous table we would have 
reduce prices by taking account of the depreciation of the unit of 
account. This is what I understand Paul C's point about normalisation 
to be, correct? This is also why Sweezy says that the inequality 
between total price in the modified scheme and total value in the 
unmodified scheme does not break in practical terms the first 
equality which would have been maintained if we had taken the more 
mathematically complicated route and chosen an hour of labor time as 
the unit of account.

>This analysis is perfectly coherent, on the (of course,
>unrealistic) assumptions given.

But there remains the question of whether we are wasting time 
transforming the inputs. Have Fred, Alejandro and Paul Mattick Jr 
read Marx correctly that the cost prices are a given precondition 
which do not have to be modified. As I said in 4632 and 4626, there 
is much to recommend their interpretation, though I do think it 
implies that there is another problem in the transformation tables to 
which Marx is himself pointing.

I certainly think Marx is pointing to there being an error of one 
kind or another because of his assumption of V<>P (<>meaning 
proportional). Either

the error is that the inputs are assumed to have sold at P<>V and the 
cost prices have to be modified which is the standard interpretation; 

the cost prices are real given preconditions in a realistic sequence 
and thus do not have to be modified, but in constructing his table, 
Marx  had wrongly assumed that price which the use of the means of 
production has cost the capitalist was  proportional to the value of 
the used up means and thus the value transferred from them. There is 
much to suggest to suggest that the error to which Marx himself was 
pointing is of the latter sort (capital 3, p. 309 can be read as 
supplementing p. 265 in this interpretation).

Yours, Rakesh

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