[OPE-L] price of production/supply price/value

From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Sat Jan 28 2006 - 10:55:29 EST

Ian Wright wrote:

If Marx's theory of value doesn't work even when all these concessions
are made, then, so the argument goes, it won't work for reality.

I figured as much, but what exactly has to be proved anyway? An accountant's
proof is a reconciliation or consolidation statement, essentially an
arithmetic proof, which shows that all entries have been accounted for, and
none left out or changed surreptitiously. A mathematician's proof is an
equation which shows that the different quantitative expressions must
logically refer to the same quantity. These are sophisticated developments
of the basic cognitive processes of stimulus identification, stimulus
discrimination and stimulus generalisation.

The difficulty is typically definitional - we assume what we need to prove,
i.e. we make things true by the terms we use. An economic process can be
analysed into numerous variables which, being variables, are subject to
change all the time. To understand how those variables relate, we do require
at least some constants, otherwise we cannot measure or compute anything.
But if we have to make counterfactual assumptions to obtain our proof, then
it's not a very good proof.

As far as I can see, what Marx aims to do, is to show how the share-out of
income realised from new product values among enterprises or sectors is
affected by overall market conditions which none of them control. The
"simplest case", is a case where there exists a ruling or average rate of
profit, as well as total profit and total surplus value being equivalent,
the rate of surplus value is uniform, and so on. Marx seems to have thought
those hypotheses were realistic, since he thought a developed market will
really tend towards that outcome.

There's a big difference though for Marx between (surplus-) values produced
and (surplus-) values realised, which is precisely the implication of
Ricardo's "contradiction", i.e. the discrepancy of values and prices. That
contradiction reflects the practical reality that product values are
produced before their final real prices are established, and that
enterprises do not know how much income exactly they will get from the
values they have produced. The problem Marx is then really concerned with
is, how is this contradiction mediated in practice, and how will capital
flows move, assuming the fulcrum of competition is the maximum realisation
of surplus value (i.e. ideally sales at prices above ruling production
prices) ?

We can impute a number for a value and a number for a realised price, and
then examine mathematically how they would relate under given conditions.
But surely drawing an equation between values and prices cannot prove
logically that value magnitudes must correspond to price magnitudes?

It seems to me there is no logical proof of the theory of value possible in
this sense, beyond its internal coherence, only empirical proofs, i.e. does
the real pattern of economic behaviour occur as the theory would predict?
Anybody knows e.g. that you cannot "prove" that GDP is the correct measure
of gross value-added, that is true by the definition of terms. All you can
prove, is that the concept is more or less accurately measured empirically,
with observed prices adding up to the ideal price as consistently as
possible. But what Marx was really concerned with was the specific pattern
of adjustment of production conditions and market conditions, in a situation
where the movement of capital is guided by profit maximisation. It's not a
problem of comparative statics, but of dynamics, a "law of motion".

The use of mathematical equations is based on the idea that there is
something to be equated. Thus, if we assume total values and total prices,
and total profits and total surplus values, are identical at the
macro-level, then the divergence of values and prices at the micro-level
must be reconcilable at the macro-level, just as in an accountant's balance
sheet. Once you have that idea, you can create mathematical functions to
show how values and prices will be allocated, in a (hopefully) logically
tight solution. But all you've really done, is to say that values and prices
are not equal magnitudes at the micro-level, but equal magnitudes at the
macro-level. Qualitatively different entities at one level of abstraction
become qualitatively equal entities at another level of abstraction.
Ricardo's contradiction remains... it is logically irreconcilable, yet in
practice it is reconciled, hence the notion of a dialectical relationship.


This archive was generated by hypermail 2.1.5 : Tue Jan 31 2006 - 00:00:02 EST