Re: [OPE-L] Capital in General

From: Paul Bullock (paulbullock@EBMS-LTD.CO.UK)
Date: Thu Oct 20 2005 - 10:57:31 EDT

Fred, thank you for taking the time to write up your reply. The point I am
trying to make is that, if as you and I agree, Capital is all along
effectively dealing with a theoretical process of the appropriation of
reality through the construction of mediating categoriesm, then the  notion
of the Supply of commodities at market prices possibley being equal to the
demand for them, presumably in particular departments, can only come in your
'6th' book, as a matter of 'reality', the most concrete complete sensuous
level. All the quotes you provide simply restate the assumption that the
'realisation' problem can be explained as arising from the development of
the commodity, and then money, etc as an historical process, but that
throughout the three volumes Marx constantly reverts back to the theoretical
supposition of the absence of a realisation problem in order to explain
better a series of  other fundamental relations, eg Rent and Surplus value.
He does not use the expression 'I here assume demand is = to supply'  ever!!
I don't think he would or could at thius stage.

Now I understand what you are saying, but I think the use of this particular
vocabulary implies a mortaly dangerous jump in the direction of another
level of analysis requiring different 'words' , and is thus really quite
confusing, and also quite unecessary.

Best regards

----- Original Message -----
From: "Fred Moseley" <fmoseley@MTHOLYOKE.EDU>
Sent: Wednesday, October 19, 2005 3:28 PM
Subject: Re: [OPE-L] Capital in General

> On Tue, 18 Oct 2005, Paul Bullock wrote:
> > Fred,
> > Please provide a reference from Marx where he says he is assuming S=D.
> Hi Paul, thanks for your question.  My reply below.
> 1.  Marx assumed throughout Volume 1 (and Volume 2) that commodities are
> sold at their VALUES, and that their value is determined by the SNLT in
> production.  To take an important example from Chapter 7, which presents
> Marx's basic theory of surplus-value, the value of the 20 lbs. of yarn is
> = 30 shillings, which is determined by the 60 hours of SNLT required to
> produce the yarn.  In other words, Marx assumed that all the value
> produced in production is realized through their sale in circulation,
> which in turn implies that S = D.
> Therefore, every time Marx says in Volume 1 that "it is assumed that
> commodities are so sold at their values" he was in effect saying that he
> was assuming no realization problems and S = D.  The values of commodities
> in Volume 1 are abstract long-run equilibrium prices (abstracting from the
> equalization of profit rates).
> 2.  More explicit statements of this assumption in VOLUME 1 include:
> a.  CHAPTER 3, SECTION 2:  on the function of money as means of
> circulation at the level of abstraction of the "simple circulation of
> commodities".  The first phase of the circulation of commodities is the
> SALE of commodities for money, which Marx calls the "salto mortale" of
> commodities.  Marx discusses the possibility that too much linen (for
> example) has been produced in relation to the social demand for linen.
> Marx then states his general assumption:
> "Here, however, we have to look at the phenomenon in its PURE SHAPE, and
> must therefore ASSUME THAT IT HAS PROCEEDED NORMALLY." (p. 203; emphasis
> added)
> In other words, even though the relation between production and demand in
> the real capitalist economy is a "matter of chance", Marx wanted to
> analyze capitalism is its "pure shape".  In the rest of Section 2, Marx
> assumes that the 20 yds. of  linen is $2, which is proportional to
> socially necessary labor-time, i.e. that the "salto mortale" is
> successfully completed.  This is the general assumption that Marx makes
> throughout Volume 1 (and indeed all three volumes).
> Toward the end of Section 2,  in the subsection on the second phase of the
> simple circulation of commodities, the PURCHASE, Marx returns to the
> question of the relation between supply and demand, in a brief critique of
> Say's Law, according to which supply is always equal to demand ("nothing
> could be more foolish").  Marx argues that, because the circulation of
> commodities is divided into two phases - sale and purchase - there is
> always the possibility that some commodity-owners who have sold their
> commodities will choose not to purchase other commodities, i.e. to hoard
> money (at least for a while).  In this case, other commodity-owners will
> not be able to sell their commodities, and thus a realization crisis could
> occur.  Supply will not be equal to demand, but will be greater than
> demand.  At the end of the paragraph on Say's Law, Marx states:
> "These forms therefore imply the possibility of crises, though no more
> than the possibility.  For the development of this possibility into a
> reality a whole series of conditions is required, which do not yet even
> exist from the standpoint of the simple circulation of commodities."  (p.
> 209)
> The main "conditions" that must be explained before realization crises can
> be explained are the production of surplus-value (Vol. 1) and the
> distribution of surplus-value (Vol. 3).  And also the "credit system",
> which was to be analyzed at a later stage after Vol. 3.
> In the meantime, for the rest of the three volumes, in order to analyze
> capitalism in its "pure shape", Marx continued to assume that commodities
> are sold at their full value, and thus abstracts from realization crises,
> which will be explained later.
> b.  CHAPTER 5:  At the end of Chapter 5, Marx poses in stark terms the
> main question that his theory in Volume is intended to answer, and states
> the main assumption on the basis of which his theory will answer this
> all-important question:
> "The transformation of money into capital has to be developed on the basis
> of the immanent laws of the exchange of commodities, in such a way that
> the starting-point is the exchange of equivalents. [24]  The money-owner
> must buy his commodities at their value, sell them at their value, and yet
> at the end of the process withdraw more value from circulation than he
> threw into it at the beginning  These are the conditions of the problem.
> Hic Rhodes, hic salta."  (pp. 268-69)
> Footnote 24 is very important:
> "The reader will see from the foregoing discussion that the meaning of
> this statement is only as follows:  the formation of capital must be
> possible even though the price and the value of a commodity be the same,
> for it cannot be explained by referring to any divergence between price
> and value.  If prices actually differ from values, we must first reduce
> the former to the latter, i.e. disregard this situation as an accidental
> one in order to observe the phenomenon of the formation of capital on the
> basis of the exchange of commodities IN ITS PURITY   If, therefore, he
> were at all interested in disinterested thinking, he would formulate the
> problem of the formation of capital as follows:  How can we account for
> the origin of capital on the assumption that prices are regulated by the
> average price, i.e. ultimately by the value of the commodities.  I say
> 'ultimately' because average prices do not directly coincide with the
> values of commodities, as Adam Smith, Ricardo, and others believe."
> (emphasis added)
> In other words, the production of surplus-value must be explained on the
> assumption that prices are equal to their values, or their average prices,
> which assume that S = D (i.e. "the exchange of commodities in its
> purity").  This theory of surplus-value ignores "accidental deviations" of
> actual market prices from their average prices, as a result of imbalances
> between S and D, because these deviations are a secondary matter compared
> to the explanation of surplus-value.
> c.  CHAPTER 7:  After explaining the all-important phenomenon of the
> magnitude of surplus-value in Chapter 7, Marx emphasized again the
> assumption that prices = values, i.e. that S = D:
> "Every condition of the problem is satisfied, while the laws governing the
> exchange of commodities have not been violated in any way.  Equivalent has
> been exchanged for equivalent.  For the capitalist as buyer paid the full
> value for each commodity, for cotton, for the spindle and for the
> labour-power  The capitalist, formerly a buyer, now returns to the market
> as a seller,  He sells his yarn a 1s. 6d. a pound, which is its exact
> value.  Yet for all that he withdraws 3 shillings more from circulation
> than he originally threw into it."  (pp. 301-02)
> d.  PART 7:  In the introduction Part 7, Marx repeats that, in his
> abstract analysis of the accumulation of capital, he assumes that "capital
> passes through its process of circulation in the NORMAL WAY" (i.e. without
> realization crises) and that "the capitalist sells the commodities he has
> produced a their values."  (pp. 709-10).
> 3.  Finally, the key concept in VOLUME 3 is price of production, which
> assumes equal rates of profit, which in turn assumes S = D.  If Marx
> assumed S = D in Volume 3, then surely he also assumed S = D in Volume 1,
> which is at a higher level of abstraction than Volume 3.  Marx's analysis
> of realization crises and market prices and S not = D was intended to be
> in a later book at a lower level of abstraction than Capital.
> I do not mean to minimize the importance of capitalism's tendency toward
> crises.  I have devoted a lot of years to Marx's crisis theory, especially
> the falling rate of profit as applied to the US economy.  However, I have
> come to realize that the three volumes of Capital are generally at a
> higher level of abstraction than crises.  "Crises and the world market"
> was the 6th book in Marx's original 6-book plan.  Capital was only the
> first book.  Capital provides the basis for a more concrete theory of
> crises, but such a theory is not presented in the three volumes.  Before
> concrete crises can be analyzed, the production and distribution of
> surplus-value must be explained.  These fundamental questions are
> explained in Capital on the basis of the assumption that capitalism is
> "functioning normally", i.e. that S = D and price = value or = price of
> production.
> Comradely,
> Fred

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