[OPE-L:4686] 2 reasons for price-value divergence

From: Rakesh Narpat Bhandari (rakeshb@Stanford.EDU)
Date: Tue Dec 12 2000 - 18:32:25 EST

I thank you for getting me so right.

I had asked for a clarification of your formula for value 
determination, but I shall assume that I have understood you.

Our difference has remained a simple one for some time: we agree that 
cost price of the used up means of production is not the same as the 
value of the used up means of production, but you argue that into the 
*value* of the commodity enters the *cost price* of the used up means 
of production, not the value of the means themselves are they are 
consumed and reappear in the final product.

Of course one advantage of my interpretation is that value is 
determined by labor time all the way through (the value of the used 
up means of production + newly added value) while your formula for 
the determination of value mixes the *price* of the means of 
production + current labor or newly added value.

I want to argue here that you  cannot reproduce Marx's reasoning that 
there are two reasons for value price divergence.

So let me cut to the chase: I consider almost all your textual 
evidence irrelevant for two reasons:

(a) I have provided you with quotes in which Marx  says that the 
value transferred from the means of production is determined by the 
value of the consumed means themselves as they reappear in the final 
product (so I don't think we will resolve this by quotes) but, more 

(b) I am not disputing that before the crucial point in vol 3 Marx 
had indeed assumed that the value of the consumed means of production 
as they reappear in the final product is proportional to their price.

So for our purposes what truly matters is Vol 3, p. 264-65 (as well 
as Capital 3, p. 309); it is in these two places which Marx lays out 
TWO REASONS why price of production and value diverge in a non 
proportional manner.

So you noted:

>5c.  The following paragraph (pp. 264-65) begins with the three sentences
>that Rakesh has emphasized in recent posts to support his interpretation:
>"The development given above also involves a modification in the
>determination of a commodity's cost price.  It was originally assumed that
>the cost price of a commodity equaled the value of the commodities
>consumed in production.  But for the buyer of a commodity, it is the price
>of production that constitutes its cost price and can thus enter into
>forming the price of another commodity."

And Marx continues:

"As the cost price of a commodity can diverge from its value, so the 
cost price of a commodity in which the price of production of other 
commodities is involved, can also stand above or below the portion of 
its total value that is formed by the value of the means going into 
it. It is necessary to bear in mind this modified significance of the 
cost price, and therefore to bear in mind too that if the cost price 
of a commodity is equated with the value of the means of production 
used up in producing it, it is always possible to go wrong."

You recognize that the two cannot be equated, but seem to think that 
nothing of importance follows from Marx noting the difference here.

But let's go the beginning

What has Marx already done  in his transformation tables, p. 256?

He has assumed the monetary expression of labor value to be one. This 
allows him to treat the proportionality assumption of P<>V in which 
the constant of m has been dropped as a simple equality P=V.

Marx thus assumes that the means of production which have been 
purchased as a result of outlays on constant capital were bought at 
prices equal to their values.

Marx then writes up his tables so that the money cost to the 
capitalist of the used up means of production  is equated with the 
value of the consumed means as they reappear in the value of the 
final product.

Only upon analysis of the completed tables do we understand why the 
value of the means of production cannot be equated with price paid 
for them. You of course are not denying that Marx is pointing to a 

I argue that this assumption is built into Marx's transformation tables.

The first conclusion to draw from the transformation tables is that 
due to the divergence between surplus value produced and profit 
appropriated, commodities cannot exchange at prices determined by or 
proportional to their values though the law of value still regulates 
prices in the aggregate.

But there is another reason for value and price to diverge. It is 
alluded to here (p.265), and again noted on p. 309. This is what your 
interpretation has been unable to account for.

But let's get the first reason for divergence straight.

A commodity's price of production is c + v + p or k + kr while its 
value had been assumed to be c + v + s  or substituting k for (c + 
v),  k + s. So we have divergence between kr (or p) and s as one 
reason why price and value diverge.

Marx had assumed the value of the commodity to be Lp + Lc (value of 
means of production + current labor)--of course, you disagree but 
stick with me.  Lc (or new value added) is often expressed as (v + 
s), that is as the replacement costs of the advanced variable capital 
plus the residual of the surplus value.

So Marx has expressed the determination of value as constant capital 
+ [variable capital + surplus value] (c + [v + s]), though strictly 
speaking it is Lp + Lc.  But kr or p in price determination is not 
equal to s.

So value (c + v + s) does not equal price (c + v + p).

And the other reason for divergence is that the price of the means of 
production, which has determined the money sum laid out as constant 
capital (c), is not equal to the value of the means of production (Lp)

So now we have value expressed as [Lp + (v + s)] or [Lp + Lc] does 
not equal price, expressed as (c + v + p) or (k + kr) or (k + p).

I have presented an interpretation in which commodity value diverges 
from its price for two reasons, just as Marx says on pp. 309-9:  the 
difference between surplus value and profit [s and kr (or p)] and the 
difference between the value of the consumed means of production and 
the price paid for them (or the money laid out as constant capital) 
[Lp and c].

So, Fred, unless you can reproduce Marx's DOUBLE reasons for 
price-value divergence, I would say that your interpretation cannot 
be sustained.

Comradely, Rakesh

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