[OPE-L:8155] Re: Re: 'Testing Marx or why the law of value holds'

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Tue Dec 10 2002 - 12:36:26 EST

Andrew B writes in 8152

>Dear Paul C and all,
>Though I have not the time to study the argument in great detail I
>very much appreciated Paul's theoretical explanation of why prices
>and labour times are closely correlated [8111].
>This explanation seems potentialy to be an important contribution
>to the debate on the transformation problem despite Paul's
>boredom with that literature. It is well known

though not by me and a few other people on this list. I shall just 
rework a few old posts to register my disagreement with this hoary 

>that in Vol 3, ch.9
>Marx's initial discussion does not transform the inputs.

If they are already transformed, e.g., the sum of money invested as 
constant capital is already determined by k+(r)k of the means of 
production, why do the inputs have to be transformed?

Marx never admitted to the need for the inputs to be transformed. 
After he completes his transformation tables and recognizes 
price-value disparity, Marx realizes that he had mistakenly  inferred 
the value transferred gratis by workers from the means of production 
from the cost price of the used-up means of production. But there is 
an inverse transformation problem as Marx himself recognizes (Seton 
and Samuelson both had recognized the possibility of this 
interpretation)-- that is, it is in principle not possible to 
determine the value transferred from the flow price data in each 
branch because the price of the input means of production diverges 
from their  value.

As Carchedi, Alejandro Ramos Martinez and Fred M. have repeatedly 
emphasized, Marx is never denying that in his transformation tables 
he began with the money sum which had been invested as constant and 
variable capital; he is only underlining that  those goods had to 
have sold at prices gravitating around their respective prices of 
production, not their values. Which gives no reason to extend the 
transformation from values to prices to the inputs. But it does give 
us reason to question what the value of the used up means of 
production actually was and thus the value which workers transferred 
gratis to the commodity output.

Moreover, Marx is saying that while he assumed in his transformation 
tables that the rate of exploitation is 100%, it may have been less 
once we recognize that the price of production of wage goods could 
have been greater than their value or the rate of exploitation may 
have been greater if the price of production of the wage goods had 
been less than their value. In other words, if the prices of wage 
goods had exceeded their value, then the given sum of variable 
capital allowed for the purchase of fewer labor hours and s/v had to 
have been lower than Marx assumed; and if the price of production of 
wage goods had been less than their value, then the given sum of 
variable capital which is represented in the cost prices would have 
allowed capital to purchase more labor hours and thus enjoy a higher 
s/v than is represented in the transformation tables.

What Marx is emphasizing is not that the wage good "inputs" should be 
transformed from values to prices (they could only have been bought 
at their respective prices, and their prices--we know realize--had to 
have gravitated around their prices of production). However,  to the 
extent that Marx had assumed the rate of exploitation is 100% on the 
condition wage goods sell at value (that is, the value of wage goods 
in the subsistence basket is one half labor time performed) he now 
has to correct the uniform 100% s/v rate which is simply posited in 
his tables and thus the entries in the s column because  wage goods 
could not have had sold at their value.

But Marx's point is that whatever the actual transferred from the 
means of production and the new surplus value produced in each 
branch, the value of the commodities will be greater than their cost 
price and the resulting surplus value will tend to be distributed 
according to the rule of a uniform profit rate the level of which is 
thus explainable on the basis of the law of value. Marx is only 
interested to show in bare outline the bare mechanics of the indirect 
operation of the law of value. Which of course may be redundant if 
the uniform rate of profit can be determined on the basis of physical 
quantities, but this is a more important criticism of Marx than the 
idea that he failed to transform the inputs. Marx himself never 
admitted to any such thing. That is not the mistake which he is 
laying bare in Capital 3, p. 265. Bortkiewicz read Marx incorrectly, 
Sweezy accepted the mis-reading, Sweezy's text has been hegemonic.

Again: Marx underlined that the assumptions in his transformation 
tables about the value transferred and s/v did not hold once he 
recognized price-value divergence. But this does not imply any need 
to complete the transformation of the inputs from values into prices 
of production; one simply has to realize that the value magnitudes 
are only represented through, albeit hidden by, the fetishistic price 
form, and it is not possible to know what those value magnitudes are 

Consequently,  one cannot legitimately move as Marx did step-by-step, 
from left to right (cost price, s/v, s, commodity value)  in his 
transformation tables. In fact one can never know the value 
transferred or s/v but only infer them from the fetishistic price 
data of both the inputs and outputs.  The mistake in his 
transformation tables to which Marx was admitting was simply having 
initially treated value transferred, the rate of exploitation and the 
value added as if they were on the same phenomenal level as the money 
sums invested as constant and variable capital.   In fact we can only 
begin to get a handle on these three factors (value transferred, s/v, 
v+s) after we have the price data for both the inputs and the 
outputs, and even then it would hardly be easy (or interesting) to 
determine the actual value transferred in each branch and the precise 
value of the commodity output of each branch.

There are two dogmas to the transformation problem--that the inputs 
have to be transformed from values into prices of production and that 
it's theoretically interesting to transform inputs and outputs into 
the same prices of production.

Shaikh accepts these two "strictures" (wrongly in my opinion), but 
still brilliantly vindicates Marx's transformation procedure.

>  In my view,
>Alfredo has demonstrated this is a valid procedure given Marx's
>OCC / VCC distinction. Whatever one's view of that distinction, I
>think Paul C's argument might just turn out to further back up the
>validity of Marx's procedure and also explain Marx's comments
>when Marx does (briefly) come to consider the transformation of
>the inputs. Marx first recognises this key issue with the following
>paragraph in ch.9, Vol.3:
>But the difference is this: Aside from the fact that the price of a
>particular product, let us say that of capital B, differs from its	value
>because the surplus-value realised in B may be greater or smaller
>than the profit added to the price of the products of B, the same
>circumstance applies also to those commodities	which form the
>constant part of capital B, and indirectly also its variable part, as
>the labourers’ necessities of life. So far as the constant portion is
>concerned, it is itself equal to the cost-price plus the surplus-value,
>here therefore equal to cost-price plus profit, and this profit may
>again be greater or smaller than the surplus value for which it
>stands. As for the variable capital, the average daily wage is indeed
>always equal to the value produced in the number of hours the
>labourer must work to produce the necessities of life. But this
>number of hours is in its turn obscured by the deviation of the
>prices of production of the necessities of life from their values.
>However, this always resolves itself to one commodity receiving too
>little of the surplus value while another receives too much, so that
>the deviations from the value which are embodied in the prices of
>production compensate one another. Under capitalist production,
>the general law acts as the prevailing tendency only in a very
>complicated and approximate manner, as a never ascertainable
>average of ceaseless fluctuations. 
>I wonder if Marx's argument here is expressing Paul's point that,
>given the law of large numbers, the transformation of the inputs is
>likely to leave both total wages and total constant capital costs,
>hence total costs, very close to labour times? If so this would only
>reinforce the point that abstracting from the transformation of the
>inputs is inessential to Marx's procedure.
>However, I presume I am barking up the wrong tree totally since the
>literature is so vast and I know very little of it -- if so apologies.

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