Re: [OPE-L] workers' consumption and capitalists' consumption

From: Ian Wright (wrighti@ACM.ORG)
Date: Sat Jun 03 2006 - 16:40:26 EDT

I basically agree with Jerry: capitalist consumption is required to
reproduce the capitalist class, which is socially necessary cost under
conditions of capitalist production.

This need not imply that the supply of money-capital is "productive"
in the same sense that the supply of labour is productive.
Counterfactually, the same net product could be produced without
money-capital, but it could not be produced without labour.

But the input-output representation simply counts inputs and outputs.
In simple reproduction, capitalists supply money-capital and receive
consumption goods. The money-capital commodity has a labour cost that
can be counted.

Paul has provided important feedback on an earlier version of the
paper, and his points have always been challenging and to the point.
We are at the stage of understanding what we disagree about.

Paul wrote
> However, I am not convinced that this use of 'socially
> necessary' corresponds at all to that which Marx meant
> and as such I dont see that it resolves the transformation
> problem. He has redefined value using a different meaning
> of socially necessary labour, and as such has avoided
> the original contradiction. The question however as it
> first arose is whether there is a contradiction between
> the Ricardo/Marx account of labour value determination
> and the equalisation of profit rates.

There are two different issues here:
(i) whether the Sraffian or real-cost definition of labour-value more
closely corresponds to what Marx meant, and
(ii) which of the two definitions of labour-value is theoretically correct.

With regards (i):
I deduce a different definition of labour value from Sraffa, whether
it is nearer or further away from what Marx really meant I'm not so
sure. I have an open mind about it. This requires textual evidence and

The real-cost definition of labour value certainly departs from Marx
regarding the non-proportionality of prices and labour values. But
only in the special case of self-replacing equilibrium. My feeling is
that price-value disproportionality due to new surplus-value
production will be important in dynamics, so the significance of this
result may be restricted to showing the logical incoherence of the
neo-Ricardian critique.

The Sraffian definition of labour value certainly departs from Marx
regarding the aggregrate identities and the logical priority of labour
values over prices. The existence of the transformation problem is
substantial evidence that the Sraffian definition of labour value is
not what Marx meant.

There's work to do in order to determine which definition more closely
matches Marx's texts, if that is a question that can be given a
definitive answer.

With regards (ii):
Regardless of (i) I believe that the real-cost definition of labour
value is the correct one on theoretical grounds. The basic reason is
simple: the modern, linear production definition of labour value is
intended to "vertically integrate" over the cost structure in order to
count all the direct and indirect labour required to produce
commodities. The Sraffian definition of labour value does not
vertically integrate over labour cost of money-capital. That is an
accounting error. Labour time was expended in previous conceptual
"rounds" of production to produce the commodities that capitalists
consume. This labour is not counted in the Sraffian formulae. This
real cost of production is missing. This explains the existence of a
"transformation problem" in Sraffa's theoretical framework. In other
words, Marx's theory of value is neither inconsistent or redundant,
rather there is a pervasive real-cost accounting error in the
neo-Ricardian critique of it.

The reasons why this has not been noticed are complex but
understandable. I try to explain why in the paper.

Paul wrote
> If one redefines value you can get round it, but I suspect
> that his new theory is just a relabeling of price of production
> theory - ie, it homomorphic to it.

I don't think it's possible to have a theory of value in a static
equilibrium framework. The paper is intended as an immanent critique
of Sraffa, or at least some of the value-theoretic conclusions his
book has engendered.

Certainly there is "homomorphism" in the sense that prices of
production are proportional to labour values. But this is not a simple
relabelling of price of production theory, for a number of reasons.
First, labour values are independent of prices, and can be derived
without reference to them. Second, the formulae for labour values are
derived from a real-cost analysis of equilibrium, in contrast to the
neo-Ricardian definition of labour value, which is normally stated as
self-evident (to be blunt: pulled out of a hat). Third, the
theoretical reason for the "homomorphism" is provided: Sraffa does not
count the labour-value of money-capital. Finally, all this holds
within Sraffa's theory. So this is not a new theory of value, but an
investigation of some of the hidden consequences of Sraffa's single
production framework.

There is a great deal of symmetry in a state of self-replacing
equilibrium, so indeed there are lots of "homomorphisms": the dual
accounting systems of labour-value and price are mutually consistent.
Look down every arm of the balance in equilibrium and we see the same
real costs: it's like a hall of mirrors.

All sides of the value controversy agree that prices are proportional
to labour values under conditions of simple commodity production.
Would we then describe Sraffian labour values as "just a relabeling"
of simple price theory?

Paul wrote
> However, I think the real insights of his theory probably
> apply to the problems of socialist planning.

Maybe you could expand on this?

Best wishes,

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