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

From: Ian Wright (wrighti@ACM.ORG)
Date: Mon Jun 05 2006 - 16:34:49 EDT

Hi Allin

You covered a lot of ground in your message, particularly the
Ricardo-Marx relationship and the status of the TP in Marx's work. But
to begin with, I'd like to concentrate on the key issue that you have
identified, before returning to the masters.

> This seems to be the key point.  I'm having a lot of difficulty
> with "labour cost of money-capital" as something distinct from the
> labour embodied in the means of production.

Let's consider the Sraffian definition of labour value, v=l(I-A)^{-1},
and interpret its series expansion as representing previous "rounds"
of production back in time. As everyone knows, this intepretation
isn't strictly accurate but I think it helps us to form a picture in
order to consider the accounting issues. Expanding,
v = l(I + A + A^{2} + ... )
The first term, as you know, represents the direct labour expended on
inputs to produce unit  outputs, the second term represents the
penultimate indirect labour required to produce the inputs for the
last round, and so on, ad infinitum. The claim is that we are counting
*all* the direct and indirect labour expended to produce unit
commodity outputs, and this summing up measures the labour-value of

Now consider the Sraffian reduction to dated labour representation. Expanding,
p = l(I + A(1+r) +A^{2}(1+r)^{2} + ...)
Here, in contrast to the Sraffian formula for labour values, we have
at extra (1+r) term. It's there because in order to properly formulate
competitive price accounting we must include the profit that
capitalists receive.

However, in simple reproduction, that profit income is spent on
capitalist consumption goods. Hence, in the previous "rounds" of
production, capitalists spend their profit income on commodities,
which they consume. Someone has to make those commodities.

There are two key questions now:
(i) Where is the labour-time that was expended in previous rounds on
the production of capitalist consumption goods in Sraffian
labour-value accounting? Is this labour being counted or not?
(ii) Should it be counted?

I want to concentrate on (i) in this message, because it is a matter
of fact that should be easy to get agreement on.

My answer to (i) is that the the labour-time expended in previous
rounds of production to make capitalist consumption goods -- is
missing. Sraffian labour-cost accounting does not count *all* the
direct and indirect labour that was expended to produce the ultimate
outputs. The reason is that the profit terms are not reduced to their
labour costs. This labour-cost accounting error is the cause of the
transformation problem.

Before expanding on the meaning of the labour-cost of money-capital,
it will help to get mutual understanding and clarity on key question
(i). There's a numerical corn-economy example in the appendix of the
paper that I believe makes the above points as clearly as I'm able. It
would take under 2 hours to work through it, so I of course understand
if you don't want to delve in, but it might be worthwhile, and should
help decide this matter of fact. Plus, if I've made an error, it
should be easy to spot, and you will have saved me from some
unnecessary toil and trouble.

If we can resolve (i) we can go onto question (ii), if this approach
is agreeable to you. Eventually I hope to return to all the other
issues you have raised.

Best wishes,

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