[OPE-L] Yet another TP solution

From: Philip Dunn (pscumnud@DIRCON.CO.UK)
Date: Sun Apr 17 2005 - 08:29:42 EDT

A profit-rate invariant solution to the Marxian transformation problem
Capital & Class, Spring 2004 by Loranger, Jean-Guy

"... the transformation of all costs implies that the ex post money wage rate
is different from its ex ante labour value, the ex post exploitation rate is
different from its ex ante value and the ex post money value added is different
from its ex ante labour value, which is the case in the neoRicardian solution
but not in the DFL solution."

It really is like that commedy routine where closing one drawer makes another
one open.

Loranger goes in for some Adam Smith bashing:

""The value of any commodity, therefore, to the person who possesses it, and
who means not to use or consume it himself, but to exchange it for other
commodities, is equal to the quantity of labour which it enables him to
purchase or command. Labour, therefore, is the real measure of the exchangeable
value of all commodities (A. Smith 1776, ch.5, p. 31)."
This statement is typical of Smith's command labour theory of value where he
specifies that, although value originates in labour, the value of a commodity
is not labour incorporated by the production process but is labour value gained
through the exchange process."

Ricardo objects:  

"If the quantity of labour realized in commodities, regulate their exchangeable
value, every increase of the quantity of labour must augment the value of that
commodity on which it is exercised, as every diminution must lower it.

Adam Smith, who so accurately defined the original source of exchangeable
value, and who was bound in consistency to maintain, that all things became
or less valuable in proportion as more or less labour was bestowed on their
production, has himself erected another standard measure of value, and speaks
of things being more or less valuable, in proportion as they will exchange for
more or less of this standard measure. Sometimes he speaks of corn, at other
times of labour, as a standard measure; not the quantity of labour bestowed on
the production of any object, but the quantity which it can command in the
market: as if these were two equivalent expressions, and as if because a man's
labour had become doubly efficient, and he could therefore produce twice the
quantity of a commodity, he would necessarily receive twice the former quantity
in exchange for it.

If this indeed were true, if the reward of the labourer were always in
proportion to what he produced, the quantity of labour bestowed on a commodity,
and the quantity of labour which that commodity would purchase, would be equal,
and either might accurately measure the variations of other things: but they
are not equal; the first is under many circumstance an invariable standard,
indicating correctly the variations of other things; the latter is subject to
as many fluctuations as the commodities compared with it. Adam Smith, after
ably showing the insufficiency of a variable medium, such as gold and silver,
for the purpose of determining the varying value of other things, has himself,
by fixing on corn or labour, chosen a medium no less variable.
(Ricardo, Priciples, chapter 1 section 1)"

Now Smith is confusing even though he endeavoured to be perspicuous.  He may or
may not be confused as well.  Chapter V is about real and nominal price, about
money, although the fact that exchange is mediated by money is often left out:

"The power which that ossession immediately and directly conveys to him, is
the power of purchasing; acertain command over all the labour, or over all the
produce of labour whic is then in the market. His fortune is greater or less,
precisely in proportion to the extent of this power; or to the quantity either
of other men's labour, or, what is the same thing, of the produce of other
men's labour, which it enables him to purchase or command. The exchangeable
value of every thing must always be precisely equal to the extent of this power
which it conveys to its owner." (A. Smith 1776, ch.5)

Note that command over labour [sc. labour-power] and command over the produce
of labour [sc. living labour, labour-content??] are the same thing here.  We
are in "that early and rude state of society which preceeds both the
accumulation of stock and the appropriation of land".  They diverge later. 
Ricardo's objection relies on using the first measure.

A neo-Smithian theory of money would be as follows.  Money is purchasing power.
The intrinsic value of money is its power to command labour.  Or rather powers.
The power to command labour-power is the real value of money, measured by the
ratio of aggregate labour time to the aggregate nominal wage bill.  The power
to command living labour is the absolute value of money, measured by the ratio
of aggregate labour time to aggregate nominal value added.

Since money is the universal equivalent the relative value of a produced
commodity, its intrinsic embodied labour value, is precisely equal to the value
of the sum of money it sells for.  Smith was right.  "The exchangeable value of
every thing must always be precisely equal to the extent of this power which
it conveys to its owner."

Philip Dunn

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