[OPE-L:6273] recent science and society and Fred M's interpretation

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Fri Jan 11 2002 - 12:24:35 EST

Hi Fred and others,

Just saw your (Fred's) new defense of your interpretation of KM's 
value theory in science and society.

While in this post I refer to comments by you, Alejandro, Carchedi, 
Laibman, Grossmann, , John E, Allin, Steve K, Gouverneur and Shaikh, 
I continue to think that the two main aspects of your 
interpretation--the monetary thesis that price is the necessary form 
of value and the macro thesis that the mass of surplus value is 
explanatorily fundamental--are correct, and constitute  very 
important steps forward in understanding Marx. Of course I am also 
very sympathetic to the TSS rejction of equilibrium prices and the 
methodology of comparative statics, though I am at a loss why the 
TSS'ers do not recognize that in his 1941 dynamics book to which 
Mattick Sr wrote an introduction, Grossmann demonstrated how at odds 
Marx was at equilibrium assumptions of bourgeois economists.

I noticed however that you did not mention that your interpretation 
requires that Marx's mention of double divergence in Capital 3 and 
TSV be excised in effect from the text.

Shouldn't you comment on this problem with your interpretation even 
if Laibman does not recognize it?  

i still think my inverse transformation interpretation of what marx 
himself is saying is the best for three reasons (well the fourth 
reason would be that it is consistent with the monetary and macro 
sides of your interpretation):

i. it does not require marx's text to be cut up arbitrarily--double 
divergence is preserved; 

ii. it accommodates your and alejandro's evidence that the cost 
prices are a given precondition and the inputs don't have to be 
transformed; and finally

iii. it allows us to see why the error to which marx was admitting 
has real significance for the transformation calculations that he 
carried out--that is, marx is saying that he was mistaken in assuming 
that value transferred from the means of production could be 
identified with the visible flow price of the machine (in your 
interpretation marx is cautioning only against a mistake his readers 
may make, not a mistake he has himself made in his transformation 
tables; but i don't think this reading of a mistake is convincing and 
my interpretation of the mistake to which marx is admitting leads 
exactly to the problem of double divergence which you want to excise 
from the text!).

Moreover, my inverse transformation interpretation makes sense of 
what Marx says about the average commodity. marx is not saying that 
the value of a or any commodity is determined by "adding up" c + v + 
s. He is saying that total commodity output--or the average 
commodity--can be "represented" as c + v + s.

total commodity value and the value of any commodity is merely the 
summation of indirect and direct socially necessary labor time.

as for laibman, even if he does not want to accept carchedi's (and 
ernst's) temporal, disequilibrium argument (by which i am generally 
persuaded) and insists that the socio-technical conditions must be 
kept constant in an iterative, price-adjusting solution until 
equilibrium prices are reached, i still think he underestimates the 
power of the gouverneur-shaikh solution.

g-s argues that the inputs are in direct or simple prices (here fred 
we are all agreed that the inputs have to be in some price form 
because of how price is the necessary form of appearance of value, 
though i agree with you and alejandro that the inputs themselves 
don't have to be transformed...), but if the inputs are indeed in 
simple or direct prices, this implies that the value of money is 
already given and should be held constant in the transformation 
(moreover, as grossmann argued, the constant value of money is a 
crucial methodological assumption throughout the three volumes of 
Capital, and no clear reason is given why that methdological 
assumption should be dropped in capital 3, ch. 9);  so i think 
gouverneur is correct to assume that this implies total simple price 
must then equal total price of production as neither the given value 
of money nor the given labor embodied in the output changes in the 
course of the transformation.

  I agree with the Winternitz point that this is the invariance 
condition in the spirit of the marxian system.

in the original article laibman himself said it does not matter 
whether the inputs are in values or direct/simple prices. So it seems 
safe to assume that the inputs are in price form and make up the cost 
prices of the commodities.

what do we make of the fact that except in freak cases the sum of 
surplus value in the simple price scheme will not be equal to (and 
may even be less than!) the sum of profit in the price of production 
scheme? Doesn't this destroy the exploitation theory of profit since 
profit cannot be shown to have even a mediated relationship to 
surplus value produced by labor alone?

i know you are not interested in this problem, so no reason to read 
on if you have read this far anyway!

i have been arguing that this is not damaging as laibman claims. 
Laibman simply thinks the labor theory of value goes up in smoke 
because the mass of surplus value and the mass of profit are not 
equal after a complete transformation, but at the least he has to 
make a stronger case here. Why Laibman insists that he is a Marxist 
after repudiating the labor theory of value escapes me, but I digress.

I.  the mass of surplus value does not change in real terms in 
gouverneur's complete transformation. it still buys the same physical 
mass of dept 3 or luxury goods; why does this not confirm marx's 
insight that distribution itself is not sufficient to generate real, 
i.e., not merely nominal, increase in surplus value? For example, if 
capitalists pay below value for means of production they may have to 
pay above value for luxury goods. Nothing real gained.

II even in the worst case scenario in which the mass of profit is 
nominally larger than the mass of surplus value as a result of the 
complete transformation, why does this disprove the labor theory of 
value; after all, this greater mass of profit does not result from 
economists having solved the 'complete' transformation equations but 
as a result of workers transferring gratis to the output the full 
value of means of production which are bought at prices less than 
value and/or workers being exploited at a higher rate as a result of 
wage goods selling at less than their value. I don't see why a 
nominal change in the mass of profit disproves that the only source 
of surplus value is living labor which not only transfer gratis in 
its concrete activity the value of what it works up but also produces 
newly added value.

Of course Allin may say that it is now impossible to prove positively 
the link between the exploitation of labor and profit, but this is a 
much weaker claim than the one than the claim that the complete 
transformation destroys Marx's labor theory of value with all the 
strict mathematical necessity of why 2 + 2 cannot equal 5. The mass 
of surplus value in the first scheme and the mass of profit in a 
complete transformation scheme may not in fact be equal, but this 
does not mean that living labor is not the source off all non wage 
income.  After all, we still have many  other reasons for preferring 
an exploitation theory over some variant of an agio or technical 
surplus explanation for the mass of profit.

III i argue that in the gouverneur-shaikh solution the equality of 
the mass of surplus value and the mass of profits is indeed kept in 
the  macro determinative sense that Marx meant it (and unlike Steve 
Keen, I do agree very much with Fred's interpretation of Marx's 
method of macro to micro determination). In order to carry out the 
iteration, one applies PV ratios to the inputs. But then one has a 
new total cost price. In order to proceed from there one must *first* 
determine the total mass of surplus value which labor has produced by 
taking from total price the new cost prices--surplus value for me has 
no other form than as just this intrinsically monetary residual; that 
is, surplus value does not exist or is not defined in some pure value 
account parallel to a price acount--so I also share the critique of 
dualism or the two systems approach.

This first calculation gives us for each new iteration the sum of 
surplus value which *then* sets the limit to what the mass of profits 
can add up to, so this mass of surplus value must be calculated 
*before* the profit rate and individual branch profits are 
determined. So both the explanatory primacy of surplus value and the 
equality between the mass of surplus value and the mass of profits 
are maintained in each stage of the iteration, including the last one 
at which point equilibrium prices are realized.

So whatever the (nominal!) changes in total profit as a result of a 
complete transformation in which one makes the fantastic assumption 
that socio-technical conditions remain constant until equilibrium 
prices are reached, I do not see how and why these changes damage the 
labor theory of value.

However one wants to solve this hoary problem, it  seems to me that 
many of us here are agreed the so called transformation problem has 
been an almost subconscious wish that by dismissing Marx's theory as 
logically contradictory then the real contradictions, general crises 
and catastrophes  which it predicts that will develop as the system 
moves ever forward will somehow disappear or those contradictions at 
the least will reduced to squabbles over the distribution of income? 
Doesn't the choice by many of us to be in the academy already reflect 
the strongest wish to be free of those real contradictions and 

I know there are people on this list that have contempt for the 
simple, very untechnical way I dismiss this value-price 
transformation problem and hold on to the exploitation theory of 
surplus value, but I do understand what these criticisms amount to. 
And of all the ways to develop Marx given outstanding problems in the 
theory of national differences in wages, the world market, the role 
of the state, the theory of rent as states become landlords, the 
theory of money and credit and derivatives, the theory of fictitious 
capital etc., I just can't but help see development of Marx in the 
direction of static neo ricardian value theory as a detour to nowhere.

But I don't think we'll be free of the task of answering charges of 
Marx's logical contradiction and the irrationality of Marxian 
commitments until the real contradictions that Marx's theory lays 
bare are themselves superceded.


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