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

From: Ian Wright (wrighti@ACM.ORG)
Date: Sun Jan 29 2006 - 16:45:50 EST

Hi Fred

> Ian, it is not exactly true that the rate of surplus-value changes.  The
> transformation of surplus-value into average profit as a result of the
> equalization of profit rates does not change the rate of surplus-value.
> But it does mean that the ratio of average profit to variable capital for
> each industry is different from the rate of surplus-value (i.e. the ratio
> of surplus-value to variable capital).  Perhaps this is only a
> terminological issue, but I think it is important to maintain the
> distinction between the surplus-value produced in each industry and the
> average profit received in that industry.

I agree; this is my understanding of the situation too.

> Marx's theory has an entirely different analytical framework than a
> Sraffian general equilibrium framework. Marx's analytical framework is
> the circulation of money capital:
>         M - C ... P ... C' - M'
> This is very important, and I think not sufficiently emphasized and
> understood.

You know, it is an amazing fact that Kurz & Salvadori's comprehensive
presentation of linear production theory, "Theory of Production" (571
pages), does not have money in the index. You'd think they'd slip it
in just so people wouldn't point this out.

But, as you know, the Sraffian framework does describe situations in
which profits are made, and situations with a net product, including
an increasing net product.

> The Sraffian general equilibrium framework takes as given the physical
> quantities of inputs and outputs.

Sraffa introduces his system this way. But subsequently most authors
begin with technical coefficients, i.e. unit input-output relations.

> Marx's circulation of money capital
> takes as given the initial quantity of money capital M advanced to
> purchase means of production and labor-power, prior to production.  The
> main question of Marx's theory is:  how is the initial given M transformed
> into (M + dM) as a result of production?


> In terms of circulating capital only, the initial given M is the cost
> price.  According to Marx's theory, the cost price does not change in the
> transformation of values into prices of production, because the SAME cost
> price is taken as given in the determination of both values and prices of
> production - the actual cost of producing the commodities.


> It follows
> from this interpretation that all of Marx's aggregate equalities are
> always true simultaneously (they are not conditional equalities whose
> satisfaction depends on the compositions of capital in different
> industries).

Thanks for the attached papers below -- which I will read. Maybe I
should not comment until then, but of course your claim contradicts
the neo-Ricardian results on the TP, which in general demonstrate that
there is no necessary relationship between labour values and aggregate
price quantities. (This is an important point that I have only
recently understood, thinking that the neo-Ricardian critique was
essentially that Marx's conservation claims were contradictory. There
is more to it than that. They argue that labour values and prices are
in general unconnected accounting systems.)

What is the key difference in your reading of the transformation that
avoids the neo-Ricardian results? Are you rejecting simultaneous
determination, for example?

> As for the MELT, this is another difficult and important question, as you
> emphasize.  I argue that, with commodity money, the MELT is determined by
> the inverse of the value of gold (i.e. labor-time contained in a unit of
> gold) (MELT = 1/Lg), and that the MELT does not change as a result of the
> transformation of values into prices of production.  It follows from this
> interpretation that Marx's laws of conservation of value and surplus-value
> are maintained.  I have a recent paper on this subject ("Money and the
> Transformation Problem") in a new book edited by me entitled "Marx's
> Theory of Money:  Modern Appraisals" (Palgrave 2005) (it's a good
> collection, I think, with chapters by the usual members of the ISMT, plus
> Foley, Lapavitsas, Itoh, de Brunhoff and others).  I have also attached a
> copy of this paper.
> The case of non-commodity money (presumably capitalism today) is different
> and more complicated.  I also have a recent working paper on this subject
> (also attached), in which I extrapolate from Marx's treatment of fiat
> money in his time, the end result of which is that the MELT =  (MV / L).
> That is, the amount of money new-value produced by each hour of SNLT is
> determined by the general relation in the economy as a whole between the
> total quantity of money in circulation (adjusted for velocity) and the
> total quantity of labor-time that has to be represented as money.

I have read your papers on this once or twice before, and will do so
again (it takes quite a few tries before things sink in). However, in
terms of symbolic money, I think it might be important to make a
distinction between money in circulation and money that functions as
money-capital advanced. Money in circulation is costless, a means of
exchange. Advances of money-capital from the capitalist class, in
contrast, have a cost, which is the rate of profit, the return that
must be paid to capitalists from firm revenue. Money-capital, as
opposed to money in circulation, therefore is a commodity with a
price, just like any other. You are trying to get a labour-value for
money via the quantity equation. But if we distinguish money-capital
from money, then we can start to treat it like a commodity, even if a
purely nominal symbol. I am working on this at the moment. Perhaps
you'd be willing to take a look at it when done? I'd value your



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