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

From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Tue Jan 31 2006 - 04:51:57 EST

Andrew Brown wrote:

>Imo, the economic basis for refuting neo-R critique lies in the
>necessity for there to be limits on prices, to ensure enough needs of
>workers are met, and enough profit needs of capitalists are met, across
>the economy and through time. These limits are given by SNLT.
>The theory of exploitation shows in essence how the system actually
>enforces these limits. But it is folly to think that at any point in
>time the aggregate equalities actually hold at market prices because the
>limits take effect only through rupture and crisis.
I think this understates the power of value constraints. They operate
all the time and are considerably stronger than profit equalising
A firm whose selling price does not cover the direct and indirect wage
has a short life expectancy, whereas a firm can go on indefinitely
with a rate of profit below the economy average, provided that its gearing
ratio is low.

Assuming price/direct costs are normally distributed, the first criterion
means that the standard deviation of this distribution must be small.
Suppose the rate of surplus value is 50%, then we would expect that
coefficient of variation of the price / value ratio would have to be less
than 0.25, because otherwise more than 5% of firms would not even
be meeting their direct and indirect wage costs ( and hence since the
indirect wage costs are always less than C, would be running at
a large loss ).

It is hard to see that the constraints on the coefficient of variation of
the rate of profit are anything like as tight. Provided that the rate of
profit was still positive, a firm could continue operating with a profit
rate 2 SDs away from the mean.

Paul Cockshott
Dept Computing Science
University of Glasgow

0141 330 3125

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