[OPE-L:5806] Re: Re: Re: Response to Fred - 1

From: Fred B. Moseley (fmoseley@mtholyoke.edu)
Date: Wed Jun 06 2001 - 11:26:56 EDT

This is a belated reply to Rakesh's critique (in 5678 and 5682) of my
interpretation that Marx's concepts of value and price of production are
long-run equilibrium prices.  Rakesh, thanks for your comments.  

On Mon, 28 May 2001, Rakesh Narpat Bhandari wrote:

> Fred, I don't think Marx believed in such a thing as equilibrium 
> values. After all, to argue that the average rate of profit not only 
> does not negate the law of value but becomes the form in which said 
> law asserts itself does not commit one to the thesis that market is 
> ever in the process of settling down on equilibrium values. You will 
> note here that your equilibrium interpretatation of the law of value 
> is at odds with Mattick Sr' interpretation of Marx (as well as 
> Korsch's, Grossmann's and Blake's).

Yes, I argue strongly that Marx's value and price of production are
long-run equilibrium prices, in the classical sense of long-run
center-of-gravity prices, around which actual market prices fluctuate (not
in the neoclassical sense that there is no tendency toward change). Marx's
concept does not assume that the prices are ever actually equal to the
long-run center-of-gravity prices.  But I think (based on lots of textual
evidence) that Marx assumed that there is at least a general tendency of
market prices to move in the direction of the long-run center-of-gravity
prices.  At least as a first approximation before a more detailed analysis
of competition and the distribution of surplus-value.

I have written a paper in which I provide substantial textual evidence on
this important point, which is available on my website ("Marx's Concept of
Price of Production as Long-run Center-of-Gravity Prices" at
www.mtholyoke.edu/~fmoseley).  Over and over again, is all his
manuscripts, Marx described his concepts of value and price of production
as long-run center-of-gravity prices.  See especially Chapter 10 of Volume
3 of Capital.  In a number of places, Marx explicitly equated his concept
of price of production with Smith's and Ricardo's "natural prices", which,
as is well known, were long-run center-of-gravity prices.  A few examples
from this paper are presented at the end of this post.

Thus I think the textual evidence is quite strong that Marx's concept of
price of production refers to long-run center-of-gravity prices.

Rakesh, would you please take a look at this paper, and tell me what you
think?  Thanks very much.  

And would also you please present any textual evidence that you have that
suggests that prices of production do not refer to long-run
center-of-gravity prices?  If Marx's prices of production are not long-run
center-of-gravity prices, then they must be actual market prices,
right?  But then why did Marx distinguish so clearly and consistently
between prices of production and market prices?

Also, would you please send me references in which Mattick, Sr. argued
that prices of production are not long-run center-of-gravity prices?  I
don't remember anything like that at all.  And where did "Mattick take
issue with Rubin" on this issue?  Looking again at Marx and Keynes,
Chapter V is entitled "The Law of Value as `Equilibrium Mechanism'".  In
the first paragraph, Mattick writes:

"In order to show once more that profit or surplus-value is gained in
production and not in exchange, Marx found it advisable to DISREGARD THE
EFFECTS OF MARKET COMPETITION on value relations.  This is possible only
in theory, because the production process cannot actually be divorced from
the exchange process.  Yet, according to Marx, the laws of capitalist
production "cannot be observed in their pure state, until the EFFECTS OF
Vintage edition).
This was not meant to suggest that such an equilibrium is actually
possible because, in fact, supply and demand never balance."  (p. 51,
emphasis added)

This is pretty much what I have been arguing.

Also Mattick, Jr. argued that Marx's prices of production are long-run
center-of-gravity prices; see his paper on the "transformation
problem" (International Journal of Political Economy, Winter 1991-92,
pp. 35-38).  

> While the political economists understood exchange to be regulated in 
> long run equilibrium by equal labor time for equal labor time, Marx 
> critiqued Ricardo for not grasping why implicit in the system of 
> value--that is in the necessity that individual labor be represented 
> through the exchange of things as general abstract social labor 
> way--was not the tendency to equilibrium in exchange but crisis in 
> accumulation.

Marx's assumption of equilibrium in his theory of surplus-value in Vol. 1
and his theory of price of production in Vol. 3, does NOT imply that Marx'
thought that capitalism is not prone to crisis.  But crisis is not the
subject of the three volumes of Capital.  "Crisis" was supposed to be the
subject of the last book in Marx's six-book plan.  "Capital" was only the
first book and is thus at a much higher level of abstraction than
crisis.  Before explaining concrete crises, much theoretical work had to
be done, beginning with Marx's theory of surplus-value in Vol. 1 of
Capital and his theory of the distribution of surplus-value and prices of
production in Vol. 3.  For this more abstract theory, Marx assumed supply
= demand, in order to analyze capital in its "pure state", without
accidental disturbing influences.

Finally, below are a few of the many passages in my paper in which Marx
stated that prices of production are long-run center-of-gravity prices,
which assume supply = demand.  Rakesh, how do you interpret these


Geert and Nicky and other VFers, I would still appreciate an answer to my
question (in 5643) about whether the prices in VF theory are
disequilibrium market prices.  Thanks


The exchange or sale of commodities at their value is the rational,
natural law of equilibrium between them; this is the basis on which
divergences have to be explained, not the converse; i.e. the law of
equilibrium should not be derived from contemplating the
divergences.  (Capital, Vol. 3, p. 289)

The real inner laws of capitalist production clearly cannot be explained
in terms of the interaction of demand and supply ..., since these laws are
realized in their pure form only when demand and supply cease to operate,
i.e. when they coincide.  In actual fact, demand and supply never
coincide, or, if they do so, it is only by chance and not to be taken into
account for scientific purposes; it should be considered as not having
happened.  Why they does political economy assume that they do
coincide?  In order to treat the phenomena it deals with in their law-like
form, the form that corresponds to their concept, i.e. to consider them
independently of the appearance produced by the movement of demand and
supply.  And, in addition, in order to discover the real tendency of their
movement and define it to a certain extent.  (Capital, Vol. 3, p. 291)

If supply and demand coincide, the market price of the commodity
corresponds to its price of production, i.e. its price is then governed by
the inner laws of capitalist production, independent of competition, since
fluctuations in supply and demand explain nothing by divergences between
market prices and prices of production - divergences which are mutually
compensatory, so that over certain longer periods the average market
prices are equal to the prices of production.  As soon as they coincide,
these forces cease to have any effect, they cancel each other out, and the
general law of price determination corresponds to price of production in
its immediate existence and not only as an average of all price movements,
and the price of production, for its part, is governed by the immanent
laws of the mode of production.   (Capital, Vol. 3, pp. 477-78)

The division of the social profit as measured by this [general rate of
profit] ... produces prices of production that diverge from commodity
values and which are the actual averages governing market prices.  But
this divergence from values abolishes neither the determination of prices
by values nor the limits imposed on profit by our laws...   Market prices
rise above these governing production prices or fall below them, but these
fluctuations balance each other out.  If one compares price lists over a
prolonged period, and ignores those cases in which the actual value of a
commodity alters as a result of a change in labor productivity, as well as
cases in which the production process is disturbed by natural or social
disasters, it is surprising both how narrow the limits of these
divergences are and how regularly they are balanced out.  (Capital,
Vol. 3, pp. 999-1000)

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