(OPE-L) [Jurriaan] Additional note [on VFT]

From: OPE-L Administrator (ope-admin@ricardo.ecn.wfu.edu)
Date: Sun Apr 18 2004 - 14:28:37 EDT

----- Original Message -----
From: "Jur Bendien" <bendien88@lycos.com>
Sent: Sunday, April 18, 2004 6:12 PM
Subject: Additional note

 Hi Jerry,

 One more point about "value-form theory" while I think of it. Marx
discovered that in a society based on a universal market, the production
of output is conditional on the chrematistic activity of the
accumulation of capital, whereby a sum of money is transformed into a
larger sum of money, and that for this reason, the motive for engaging
in production is the expectation of capital accumulation, which has
profound social consequences for human society and its future. As we
know, capital accumulation (growth of capital) has five phases or
moments: investment, valorisation,
realisation, re-investment and unequal exchange.

 If Marx often "abstracts from use-value", this is not because he thinks
capitalists are indifferent to it, but rather that:

 (1) if no individual or social use-value for a good existed at all,
nobody in a healthy state of mind would produce it;
(2) use-value is in practice subordinated to exchange-value, since the
dominant aim of capitalist production is self-enrichment through trade
in use-values;
 (3) In the final analysis, consumption is determined and shaped by, and
consequent upon, production - since, in the final analysis one can
neither exchange or consume what hasn't been produced; at most you can
displace the consequences of consuming and exchanging of what others
have produced in space and time through credit, and utilise disparities
in production-time and circulation-time; the victors in capitalist
competition always have temporal and spatial advantage.
 (4) the worker is relatively indifferent to the specific output he
produces, he is interested in them mainly as consumer, a circumstance
which preoccupies management a great deal (e.g. total quality
management). (5) Responding to market demand for a commodity involves
reconciling individual use-value with social use-value, something which
acquires a speci al function as ""marketing", i.e. plying your wares.

 The careful reader of Marx's book will notice that for Marx "use-value"
an enormous impact on the whole process of social reproduction, and that
he always keeps this aspect firmly in view in discussing capitalist
trade. You cannot distinguish between producer goods, investment goods,
consumer goods, luxury goods and military goods without reference to
objective use-value. Nor can you explain market demand without reference
to objective use-value.

 In discussing the equalisation of the profit rate, Marx thus writes for
example: "Even though both commodities and money are unities of
exchange-value and use-value, we have already seen (Volume 1, Chapter 1,
3) how, in the course of buying and selling, the two determinations are
distributed in a polarised way at the two extremes, so that the
commodity (seller) represents use-value and money (buyer) represents
exchange-value. It was one precondition for the sale that the commodity
should have use-value, and thus satisfy a social need. The other
precondition was that the quantity of labour contained in the commodity
should represent socially necessary labour, that the individual value of
the commodity (and what is the same thing under this assumption, the
sale price) should therefore coincide with its social value" (Marx
refers to his previous book here, A Contribution to the Critique of
Political Economy). (cited from Cap. Vol. 3, p. 282-283, Pelican

 This is approximately where value-form theory stops. But I have
already how Karl Marx used the term "value" to apply to different
magnitudes of labour-time and different prices, according to various
different theoretical assumptions. The research statistician, faced with
the task of quantifying observable magnitudes of value, would say that
Marx claims that a commodity in a capitalist economy could be said to

 (a) an "individual use-value" (Ui, an objectively existing,
physically-existing characteristic of a tangible, alienable good or
labor-service that can satisfy a human need or want).
(b) a "social use-value" (Us, the socially recognised, physically
manifest use-value of the total output of that commodity, as related to
the total socially recognised need for that commodity, i.e. the
magnitude of monetarily effective demand for it).
(c) an "individual value" (Vi, equal to the modal quantity of
labour-time currently socially necessary to reproduce one unit of that
commodity, expressible in labour-hours)
(d) a "social value" (Vs, equal to the modal quantity of labour-time
currently socially necessary to reproduce the total output of that
commodity assuming all output is sold, expressible in labour-hours).
(e) an "individual exchange-value" (EVi, the ratio in which one unit of
the commodity will currently exchange for any other commodity,
expressible in product units or money-prices).
(f) a  "social exchange-value" (EVs, the ratio in which the total output
of the commodity will currently exchange for the total output of any
other commodity, expressible in product units or money-prices).
(g) a "market-value" (MV, the exchange-value which the commodity would
have, if supply and demand for it were equal under current production
conditions, expressible in product units or money-prices; depending on
the relative growth rates of supply and demand, this is established by
the more efficient or less efficient producers, expressing the physical
reality that you cannot sell more units of output than have been
produced - apart from that, there is only social reality is you can only
sell financial claims to output based on future expectations of supply
and demand).

 And, in addition:

 (h) an "individual production-price" (PPi, the actual cost-price + the
actual profit realised on average, in respect of the sale of one unit of
that commodity or total output by the individual enterprise in the
present). (i) a "sectoral production-price" (PPs, the average cost-price
+ the average quantity of profit realised in respect of the sale of this
type of commodity by all competing producers of that commodity; this
regulating price must reflect a degree of equalisation of production
conditions between producers, under competitive conditions, as well as
the elimination of large
demand-supply fluctations, i.e. the existence of a "developed market"
within an institutional framework where obstacles to price-competition
have been cleared away, and in which supply can meet demand fluctuations
relatively efficiently, without bottlenecks)
(j) a "monopoly production-price" or "regulating price" (MPP, basically
a production price + a surplus-profit, reflecting the circumstance that
one or a few producers supply the major portion of market demand).
 (h) an "individual market price" (MPi, the actual current sale price of
unit of the commodity to the final consumer).
(i) an "average market price" (MPa, the average current sale price of
one unit of the commodity to the final consumer).

 Marx's theory then aims to explain how these values and prices are
systematically related, for the purpose of elucidating the conditions
and dynamics of capital accumulation at the micro-level, the sectoral
level, and the macro-level.

 In respect to the "value conserved" mentioned in (c), what most authors
the discussion about "moral versus physical depreciation" (market
obsolescence versus physical obsolescence of fixed assets) actually
forget, is that the way the bourgeoisie views depreciation write-offs
and schedules is highly dependent on the existence of "emerging markets"
or "developed (stable) markets".

 This is why Marx found it very difficult to decide how to theorise
depreciation in his value-theory, as he confessed in his correspondence
on the topic. But, basically, depreciation refers to current replacement
cost of a fixed asset at market prices (I would say, really,
production-prices). For this reason, in calculating the magnitude of
value conserved/transferred by living labour in production, no logical
problem of an infinite regress in past ("dead") labour hours really

 According to this pseudo-problem, the value of a commodity would
express a
quantity of living labour + a quantity of past labour, in which case,
academics talked about "dated labour" and so on. Prof. Perelman argues
that because of this infinite regress, real capital compositions could
not be empirically known.

 But that is not really what Marx is talking about, he is talking about
commodity value in relation to the current expenditure of living labour
on that commodity; i.e., inputs are consumed in production to create a
new output, and the "value" of that new output refers to the
labour-hours required to produce it, and not to the value of the inputs
used to make it. This is a relation between the present and the future,
not between the present and the past. Unless you believe in time-travel,
the past no longer exists except in human memory.

 The relationship between past labour and living labour which the
"conservation of value in production" expresses is relevant to capital
accumulation only in that additional profit can be obtained from the
discrepancy between "historic cost" and "replacement cost" (the latter
which can also be valued in various ways of course), which affects
production-prices. In Marx's own time, this question was less important,
since the average organic composition of capital was much lower than it
is today. But nowadays, a much more careful and comprehensive analysis
of depreciation is required, taking account of the stratification of
fixed capital assets, simply because:

 (1) If the average value of fixed assets operated per worker has become
very large (something which may require more skill) then the discrepancy
between the historic cost and replacement cost of those assets is worth
a lot of money;

 (2) If (a) the average turnover-time of capital has accelerated
historically, (b) the dispersion of the prices of different types of
fixed assets has increased, and (c) there is also a greater dispersion
of the circulation-times of outputs due to better techniques for the
preservation of use-values, then the difference between historic cost
and replacement cost becomes highly significant from the point of view
of enterprise production-prices and realised profits.

 (3) A stage in the development of the productive forces has been
where continual product differentiation is economically irrational in
many cases, and accelerated moral obsolescence can have devastating
ecological implications.

 (4) The value of durable assets resulting from previous production
which can be traded and are traded, has increased enormously, both
absolutely and in proportion to the value of new output which is traded.

 The International Accounting Standards Board now increasingly requires
corporate accounting to be done at prices which reflect replacement
costs at current market prices, rather than at original acquisition
costs (historic costs). So the "dated labour problem" is really resolved
in practice by the recognition that value exists only in the medium of
"real time" ( a buzzword), a major theoretical victory for Karl Marx,
who insisted on the necessary temporal discrepancy between values and

 Somebody might say to me, "Marx postulates 7 different values and 5
different prices pertaining just one commodity, what a terrible theory
that is." Maybe so; but the aim of these 12 magnitudes of value, these
12 concepts, is to explain the longterm movement of relative prices in
the capitalist world market within one theoretical model which permits
us to understand both the past, the present and the future of that
capitalist world market, and the social framework within which it
exists. And that is no small achievement, I think.

 We could also reply to the critics of Marx's value theory in another
through a "transformation of prices into values", in which I reverse
Marx's argument.

 Suppose that I take the prices of N number of heterogenous product
units A
and B, and add them up to arrive at price P. Now it is clear, that price
P does not "exist in the real world", because it is the sum of a number
of different prices which I have added up, not the physical price tags.
It is a "theoretical price", an accounting price.

 Yet, this abstraction has a certain determinate reality, because it
back to real prices; it is not arbitrary. But even although price P does
not exist in the real world, you could not do any accounting without
calculating P-type price aggregates, and the specific accounting
aggregate which P represents, let us call it Q, has a real effect on
business decisions and human behaviour, even although Q exists only
ideationally. Thus, when P is transformed into Q, it leads to definite
economic and non-economic actions, which I will call S for convenience.

 The occurrence of S can have an objective effect on the respective
price of
A and B and therefore on N, as economic actors J and F adjust their
behaviour and prices change as a result, let's call the change C. If C
occurs, then we can say that, although supposedly the calculation of P
resulted in an entity which did not exist in the real world, namely Q, P
through Q has nevertheless had a real effect in the real world, let us
call that effect X.

 Therefore a valuation referent, namely P, has become objectified in the
sense that it has acquired an independent existence, it is an
independent datum which, although it is not itself the price of anything
in particular, nevertheless through C exerts a real effect on the real
world of economic life, namely X.

 But since P and Q are in this sense real abstractions, we are dealing
entities influencing decisions and actions by economic actors which go
beyond prices, i.e. economic behaviour is not simply influenced by
direct prices but by derived prices which do not refer to specific
priced goods A and B.

 Yet the real price of A and B may not be known, it may be possible to
that price only in the future, therefore we may only be able to estimate
P, or establish its precise magnitude through negotiation, which I will
call an Y situation and I will call the estimate P'.

 Therefore if Y occurs, and we do wish to make a transaction involving A
B, then we must apply a valuation referent which is not reducible to any
existing price, although it may be derived from existing prices, but if
Y holds, this valuation referent affects the magnitude of P', when P' is
finally settled.

 If Y occurs, but P' cannot equate to P in a finite real time (perhaps
can only be estimated or predicted without a sufficient likelihood of
accuracy or occurrence), then market uncertainty occurs, which I will
call situation Z. If Z occurs, then even although P' does not equate to
P, P' may still affect the magnitude of the prices of A, B and C,
because J and F can either withdraw from the market, affecting prices,
or they will be using another valuation referent in order to find P,
referring to a different set of prices, let's call that referent K,
where K is subject to exactly the same conditions as P, such that K' may
also occur, causing X and C.

 If there are these competing valuation referents P and K, neither of
can be found, when X occurs (so we are left with P' and K'), then J and
F are forced to make rational choices between P' and K', but in order to
do so rationally, they need an external criterion L with which to
evaluate the choice of P' or K', let us call that situation M. If M
occurs, it is clear that to find L, we must go beyond P' or K' or any
other entity in the same ontological class, in other words, we must
refer to a variable which has nothing to do with prices, let's call that
variable V.

 Is V just a matter of subjective preference ? No, because:

 (1) if J and F are fully integrated in the market, they always have to
with prices which are given and exist independently of their
 (2) the valuation referents of all other economic actors at time T are
objective datum for J and F;
(3) the aggregate effects of all the interactions of all other economic
agents on each individual economic actor at time T are an objective
datum for J and F.

 Therefore V must be an objectified datum and not just a subjective
preference, and V relations are objectified relations.

 In addition,

 (4) If V is not objectified, then subjective preferences cannot be
choices between different options carrying different price-tags, only
just a question of taste - goodbye to any market rationality.
(5) If (4) is true, then price magnitudes are purely a subjective
response to an intensity of taste.
(6) Since tastes differ between individuals, prices can in that case not
be commensurate, and there exists neither a common basis for negotiating
an exchange nor logical basis for adding prices up, since we cannot add
up units which do not belong to the same object class such that a
meaningful aggregate results.

 People who continue to insist that economic value is just a "subjective
utility preference" really ought to have the experience of having their
bank account robbed.

 As to "post-Marxists" who reject the necessity of a theory of value in
order to explain price phenomena and economic realities, all I can say,
"you don't know what you've got, until you lose it." They didn't
understand what prices are, so how can they understand what value is ?
These post-Marxists usually adopted Marx's value theory on irrational
grounds, and hence also reject it on irrational grounds. By contrast,
businesspeople use value theory all the time, be it in an eclectic sort
of way. For his part, Marx never claimed to be very original in his
theoretical synthesis; he merely sought to eloborate the theory of value
in a way that it would be logically coherent.



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