[OPE-L:8134] Re: Testing Marx or why the law of value holds

From: Michael Eldred (artefact@t-online.de)
Date: Fri Dec 06 2002 - 10:55:40 EST

Cologne 06-Dec-2002

clyder@gn.apc.org schrieb   Wed, 4 Dec 2002 09:24:26 +0000:

> Quoting gerald_a_levy <gerald_a_levy@msn.com>:
> > Andy, responding to Paul  C, in  [8096] wrote:
> >
> > > Re your 8093.
> > > > > (1) I would be very interested to know your theoretical explanation
> > > > > for the correlations that you obtain.
> > > > This is a very difficult question.
> > > > At one level I would explain it by saying that labour is
> > > > overwhelmingly the main non-produced input to capitalist commodities,
> > > > and as such it will tend to drive the price system. It is the signal
> > > > that shows through the noise of random market fluctuations.
> > > Do you mean that wages are more stable than other major costs
> > > due to the fact that labour-power is non-produced?
> >
> > The article by Paul and Allin, "Does Marx Need To Transform?"
> > (http://www.wfu.edu/~cottrell/vol3.pdf), used input-output data for
> > the UK economy in 1984  (published in 1988).   It is not surprising that
> > wages were more 'stable' than the prices of other commodities during
> > that year.  Remember  Margaret Thatcher? (boo! hiss!)  In the US, also,
> > wages were relatively flat do in large part to the 'concessions movement'
> > initiated by capital.   Here we had Maggie's evil twin brother Ronald
> > Reagan (boo! hiss!) as President and Neo-Liberalism was on the
> > ascendancy internationally.
> >
> > In solidarity, Jerry
> Why the Law of Value Holds - in the style of F&M
> ----------------------------------------
> I want to address again the question of why prices tend to be
> proportionate to values.
> I said that I thought the reason was that the labour input to
> production was
> a) not a produced commodity within the capitalist system
> b) a major element of the direct costs of each industry
> Gerry paraphrases this as wages being 'stable', but this
> is not quite what I mean. What I am saying is that ratio
> of aggregate wages to net national product is very close
> to the ratio of necessary labour time to total labour time,
> and that this in conjunction with points a) and b) constrains
> prices to follow values.

Is this total necessary labour time determined independently by measuring
minutes or through the monetary wage-form? If it is measured independently,
which empirically identifiable minutes are measured? If it is determined
through the money paid out in wages, then isn't the equality of the two ratios
mentioned given by definition? I.e. don't total wages paid make a claim overall
on y minutes of total time worked in the economy because these y minutes are
obtained by projecting the ratio of total wages times to total selling prices
onto total time worked in the economy?

> Why is the ratio of wages to national product close to
> the ratio of necessary to total labour time?
> Basically because of regression to the mean.

I.e. a statistical reason?

> Given the net national product in Euro and the total number of
> hours worked we can deduce the number of minutes
> necessary to produce one Euro of national income, call this M.
> If we multiply the price of any commodity i  by this number
> we get its current exchange value E[i] in terms of national labour.
> For any given commodity this exchange value will be
> either above or below its actual labour content L[i], according
> to whether it is selling above or below value. We know that
> E[i]/L[i] must have a mean value of 1, since commodities selling
> above and below value must cancel out. Let the standard
> deviation of E[i]/L[i] be S.
> The necessary labour time is given by the labour content of
> the commodities consumed by workers - the labour content
> of the wage bundle as the neo-ricardians put it.

Isn't this "labour content of the wage bundle" obtained by multiplying total
number of minutes worked by the ratio of wages to selling prices? Equivalently,
W x M = t(W), where W is money wages paid, M is your "number of minutes
necessary to produce one Euro of national income" and t(W) the number of
minutes labour time represented by money wages W? Then again, a temporal
quantity (labour content of the wage bundle) is obtained by projecting a ratio
of two monetary values onto total labour-time worked.

> Now if workers
> just lived on a single commodity corn, as occurs in some
> neo-ricardian models then expected the standard deviation of wages
> relative to necessary labour content would also be S, but
> in fact the wage bundle contains thousands of different
> commodities. Each of these commodities has a selling price
> that is either above or below value, but by the law of large
> numbers the standard deviation of the wage W times M
> from the actual labour content of the wage bundle will
> be much smaller than S.
> For instance in a simulation run with the individual commodities
> selling up to 20% above or below values I found that
> for a wage bundle of 10 commodities I got a 3.5% deviation
> of price from value, for 100 commodities a 1.8% deviation,
> for 200 commodities a 1% deviation and for 1000 commodities
> a 0.3% deviation.
> Thus in a real economy with a big wage bundle we can assume
> that the wage bill multiplied by the labour equivalent of money
> will be very close to the actual necessary labour time.
> Now consider all industries. Each of these has a selling
> price in labour hours made up of a wages component which
> is almost exactly equal to the V in labour time used by Marx
> in volume I of capital, plus a component C for constant capital,
> plus some random profit - determined by market conditions.

Interesting that you say that profit is random, determined by market conditions
(with which I agree, random meaning 'groundless', sine ratio). But according to
the LTV and its corollary, the theory of surplus value, profit is only the
monetary form of surplus labour, a determinate temporal quantity, and therefore
by no means random.

> For most industries C will again be made up of a large
> bundle of commodities and as such will, by the same argument
> as applied to wages tend to be purchased for a price very
> close to its value. The exception will be a few industries that
> process a single raw material - these will have a C which in
> money terms will deviate more from value than is normal.
> Empirically it is a fact that for most industries labour is the
> major cost. We know that the cost of labour WM is very close
> to Marx's v or necessary labour time, and also that for
> most industries CM will also be close to Marx's c.
> That leaves only profit as a random element causing
> prices to deviate from values.
> But we have reason to believe that there will be a constraint
> on the dispersion of profits.

Doesn't this constraint amount to the (realistic) assumption that on the whole
capital does indeed manage to get through its cycle without suffering loss?
I.e. as long as commodity values realized on the market are sufficient to cover
(mainly wage) costs plus some profit, the capital in question survives.
Loss-making capitals _are_ not, they do not exist in their concept, and
empirically too, on the whole (_katholou_)  they conveniently cease to exist.

> The profit of any individual firm will be influenced by a whole
> host of factors - a collection of random un-correlated pressures.
> We would therefore expect firms' markups over prime costs
> to be normally distributed, as this is characteristic of things
> which are the result of a sum of random pressures.
> We know the mean of this random distribution - it is
> given by the mean markup ratio or rate of profit on turnover.
> We would expect this to be of the order of 10 to 20% for typical
> economies. We also know that if the mean is say 0.15, that very
> little of distribution - say less than 10% of all firms will be
> making a loss in an average year - since firms don't survive
> long once they start making a loss.

What happens to the labour embodied in those commodity products of capitals
which fail to make a profit? Such labour has not achieved social recognition in
the value-form sufficient for the movement of value as capital to continue.
Does this portion of total concretely performed labour drop out of
consideration altogether? What is its status as purportedly value-creating
labour? Is the failure of the capitals concerned to sell at a profit the 'proof
of the pudding' that the concretely performed labour was, after all, not
socially necessary, and therefore non-value-creating, i.e. a nil under the
abstract value-form of money?

> Thus we have the mean
> of the normal distribution say 0.15, and we know that less than
> 10% of the distribution falls below 0.0. This is enough to
> fully constrain the standard deviation of the distribution
> and in practice to make it fairly narrow. This is because
> a normal distribution has only two free variables, so two
> constraints are enough to characterise it.

The consideration of profit in the above paragraph seems to be totally
independent of any labour theory of value and its corollary, the theory of
surplus value. Indeed, it reverts to production cost factor composition of
commodity prices plus a profit mark-up -- all in terms of monetary quantities
(with which I agree, since the movement of money as capital is tautologous).
Not only profit is random, but there is no guarantee that even money capital
advanced will recoup costs. An entrepreneurial venture is essentially an open
wager, based on experiential guidance, not on any knowledge in principle (such
as x minutes labour will generate y euros upon sale of the product). x minutes
labour will generate y euros for as long as x minutes labour will generate y
euros, otherwise it doesn't. It's a tautology, open, as you say, to a multitude
of random factors.

This is what it means to say that capitalism is an-archic -- it indeed has no
_archae_, no starting-point governing the movement ventured under the
value-forms. The formula (_logos_) for capital M -- C -- M' subsumes beneath
its substanceless form many individual _archai_ which venture self-augmentation
in a groundless game. Capitalism could be said to be poly-archicī, the many
_archai_ being disciplined only by constraint to the value-forms.

Greek _archae_ is Latin 'principium', 'principle'. A principle is a
starting-point or point of origin from whence something else is governed. (A
prince is a point of origin governing his people.) Thus, if concretely
performed labour created monetary value, one would have a principle for
determining the profit-augmentation in terms of concretely performed labour.
One thing would cause the other.

The statistical approach intends to test whether there is, on the whole, such a
causal relation, but, as far as I can see, it is forced to make conceptual
assumptions (see above and previous postings) which beg the question of whether
performed concrete labour 'creates' monetary value.

> It will of course, be understood by those skilled in the
> craft, that the figures 10% and 20% above are rough
> indicators for the sake of argument.
> Thus we have a results that
> 1.  the standard deviation of the rate of profit on turnover
>      has to be small,
> 2. the price of each product is made up of three components
>     wages, constant capital and this random profit markup
> 3. money wages can be expected to be very highly correlated
>     with necessary labour
> 4. constant capital in money terms will also be strongly
>     correlated with constant capital in terms of labour albeit
>     not so strongly as wages are to necessary labour
> 5. thus prices are made up of two components that
>     are very close to labour values, plus a random markup whose
>     dispersion is narrow
> It follows that prices are constrained to be close to labour
> values.

This constraint seems to be a result of i) how necessary labour time is
measured (i.e. through the monetary forms) and ii) statistical regularities
emerging from large numbers (i.e. masses of data) and iii) that performed
concrete labour which does not 'make the grade', i.e. prove itself as socially
recognized value sufficient to generate profit, evaporates.

> The argument above draws heavily on the arguments of
> Farjoun and Machover, though I have considerably
> simplified some of the statistical logic.
> This type of argument is unfamiliar
> to most Marxian economists since the vast bulk of the
> Marxian literature makes little use of  arguments about
> statistical distributions. However Marx does in one or
> two places in Capital use the concept of regression to
> the mean - for instance in arguing that the size of a workforce
> is an important factor in reduce labour to average social
> labour. Ricardo's argument for why the deviation of prices
> from values should on average be around 5% also
> pioneered this sort of argument.
> Michael is of course quite right when he points out that
> scientific investigation always takes place within a problematic,
> and that the questions one asks are one of the preconditions
> of the results one obtains. They are not however the sole
> precondition, brute reality is the other. Our problematics
> constrain our ability of interrogate reality, they do not
> constrain reality itself.
> What I found refreshing about reading Farjoun and Machover
> almost 20 years ago, was the way that they broke with the
> problematic that had dominated Marxian economics for
> decades and allowed new questions to  be asked.
> Their problematic has opened up a new research program
> which is, I believe, proving more productive than the
> rather tedious debates about the transformation problem
> that were going on before that.

I agree that the transformation problem is tedious, but for other reasons, viz.
the problems with the LTV lie at a more elementary, simple level in how value
itself is conceived, i.e. whether it has a substance at all.

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