# [OPE-L:4786] Re: modified significance of the cost price

From: Rakesh Narpat Bhandari (rakeshb@Stanford.EDU)
Date: Tue Jan 23 2001 - 22:15:02 EST

```My dear Fred,
I have conceded defeat--remember the post titled RETRACTING CRITICISM OF FRED!

It is more than plausible that the inputs are already in the form of
prices, even prices of production. I concede this.

But we have differences.

For example, we have two different formulas for the determination of
the value of a commodity:

My formula is simple: labor value of mp + current labor equals commodity value:

(1) Lmp + Lc = V

Yours is more complicated:

(2a) k + s = V
(2b) Value of the money needed to purchase means of production + Lc = V

These are not consistent, but you will note that both have been

As is obvious from formula (1), I simply do not think cost price,
i.e., money price paid for the means of production and money laid out
as wages,enters into the determination of the value at all, so I
won't comment on (2a)

There are three problems with your formula (2b), and I hope that you
will address each one one of them:

a. having used the value of money needed to purchase mp, it's
inconsistent not to use the money invested as variable capital,
instead of current labor on the left hand side of the equation (of
course if you were consistent, then you would not be able to fend off

b. it follows from your formula that the monetary value of any input
contributes to the value of the output even if that input represents
no labor value at all--that is, you break the labor theory of value.

And finally

c. your formula won't allow you to explain why Marx notes two reasons
for the price of production of commodities to diverge from their
values.

Now you implicitly grant this because you now argue that Marx  should
have only said that there was one reason for divergence!

It is clear from my formula (1) why there are two reasons:  Not only
does the value of a commodity diverge from its price due to the
averaging out of the profit rate, the value of the used up means of
production embodied therein differs from the price paid for those
means of production.

But this result cannot obtain given either of your formulas. If the
value transferred from the means of production and thus embodied in
the commodity is simply equal to the value of the money price of
those used up means--as you argue--then Marx made no error in the
used up constant capital column of his transformation tableaux by
assuming that the value transferred is the same as the value of the
money price represented by the used up means of production.

Thus assuming the turnover of fixed capital as one period, then the
output embodies (in your interpretation) the value of the money that
was needed to have purchased the means of production, not the labor
value of those fully used up means themselves. But Marx says that the
difference between the value of the used up means and the price (of
production) paid for them is another reason why the value of
commodities diverge from their price of production.

And this could not be another reason unless Marx was assuming that
value is determined according to my equation (1)!

So you have to counter that Marx should have said or meant to say
that there is only one reason for divergence!

Then you make a complicated argument that this is implicit in the way he treats
the capital or commodity of average composition. I shall deal with
this argument in a later post.

But let me clarify here that we both agree that the standard
interpretation of the transformation problem is incorrect (or you
have convinced me). While you have coquetted with Hegelian
terminology, I have playfully referred to the language of quantum
mechanics; but we are both agreed that since price is the necessary
form of value or that the potentia of value is only actualized in
price that the inputs have to already be in the price form.

There is thus no need for a more complete transformation procedure in
which inputs and outputs are both simultaneously transformed from
values to identical unit prices of production. (Of course Marx's
critics like Ajit, David Laibman, Paul Samuelson and many others
think that this Bortkiewicz-Sweezy-Meek transformation calculation is
like the Michelson Morley experiment in that it disproves the
existence of value as if were an ether like substance.)

Of course I also have a back up argument that even if the inputs have
to be transformed that there can only be in Marxian terms one
invariance condition (total simple or direct prices=total prices of
production); I have proposed a set of transformation equations which
are neither over nor under-determined. But this is neither here nor
there in terms of our debate.

All the best, Rakesh
```

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