[OPE-L] [Jurriaan] The inverse transformation problem, or, turning Marx the right way up

From: glevy@PRATT.EDU
Date: Thu Oct 27 2005 - 19:29:47 EDT

---------------------------- Original Message ------------------------
Subject: The inverse transformation problem, or, turning Marx the right
way up
From:    "Jurriaan Bendien" <adsl675281@tiscali.nl>
Date:    Thu, October 27, 2005 4:41 pm


The question I raised previously as regards US corporate profits was the

To obtain a figure for net receipts, the tax department subtracts total
deductions from total receipts, which yields $1,034 billion. (...) But now
BEA kicks in with the NIPA calculation, and they start off their estimation
procedure with a tax-assessed IRS "Total receipts less total deductions"
figure of $550.5 billion. How do they get that figure, you might ask?

There is, I should add, of course a rational explanation - conceptually,
only the production-related profit component of total sales receipts
thought to constitute part of "value added" by current production is to be
included in the NIPA account. Profits which economically represent only
transfer of ownership, without corresponding production occurring, are
excluded. The "transformation problem" here is that REAL price data have
to be transformed into IDEAL price data which correspond to the
THEORETICAL concept of gross value added, equal to the economic value of
net output.

BEA comments for example:

With several differences, this [corporate profit] income is measured as
receipts less expenses as defined in Federal tax law. Among these
differences: Receipts exclude capital gains and dividends received,
expenses exclude depletion and capital losses and losses resulting from
bad debts, inventory withdrawals are valued at replacement cost, and
depreciation is on a consistent accounting basis and is valued at
replacement cost using depreciation profiles based on empirical evidence
on used-asset prices that generally suggest a geometric pattern of price
declines. Because national income is defined as the income of U.S.
residents, its profits component includes income earned abroad by U.S.
corporations and excludes income earned in the United States by the rest
of the world.

In addition, for example, in the NIPAs mineral exploration expenditures
are capitalized and depreciated over the lifetime of the asset, rather
that treated as current expense; and bonus payments for drilling rights
are not treated as expenditures.

The funny thing I think is, while people go wild about the fact that you
cannot observe or measure surplus value with precise exactitude, the
official economists are let off the hook altogether when they "transform"
real (well, if enterprise accounts are accurate) prices charged, into
ideal prices that conform to a theoretical concept, a "transformation"
into economic net receipts which in practice amounts to a quantative
deviation of 46.7 percentage points from the real, tax-assessed net
receipts of corporations with a positive income! Real profits are
"transformed" here into theoretical profits that conform to an
economic concept, but nobody says anything about it, even although they
are quite happy to impute a transformation problem to Marx (a misnomer,
because it was really Ricardo's problem)!

The great thing about prices is that they are numbers. Numbers are exact
(well, up to a point). You can compute them. They seem "scientific" for
that reason. But the real problems start, when we ask WHAT KINDS of prices
they are (real prices charged, accounting prices, ideal/nominal/notional
prices, administered prices, imputed prices, hypothetical prices etc.) and
what exactly they are prices OF. Marx never dealt with any of this in
detail. But when we probe this question, it rapidly appears that a value
theory is involved anyway, a theory which is partly empirically based, and
partly just "a theory about the economy". Whatever the mathematical
wizardry, the system of grossing and netting actually used in aggregating
prices, ALWAYS and inescapably depends on an - explicit or implicit -
notion of what may generally count as:

*comparable value (value equivalence)
*value used up
*conserved value
*transferred value
*newly created value

This whole numerological story about theory-laden observations makes me
think back about a couple of articles I read as a postgraduate student, by
the late Andre Gunder Frank, namely: "Equating Economic Forecasting with
Astrology is an Insult - to Astrologers". In: Contemporary Crisis
(Amsterdam),Vol. 4, No. 4, 1978, pp. 97-102 (another version was published
in Ticktin's journal Critique) and "On Losing Sight of the Forest for
Looking at the Trees". In: Development & Change (The Hague), Vol. 15, No.
3, July 1984, pp. 457-463. My wager is that in the (more distant) future,
people will look back at 20th century economics and think of it as a time
when people still confused problems of prices, with problems of social

In the Bichler/Nizan theory, the inherent problems of the concept and
measurement of prices to which I refer are vulgarised into problems of
power. In a buyer's market, the buyer has a lot of power, and in a
seller's  market, the seller has a lot of power, and so on. Which is
probably true, to an extent. But on the whole, that seems to be more a
phlogiston theory of prices, which overextends the notion of power, the
result being that power itself becomes a diffuse, vague notion.


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