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

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Tue Jun 13 2006 - 22:25:47 EDT

Hi Ian,
I have been following with interest your
heroic and heroically clear arguments.
A couple of things:

1. Does your accounting
conflate juridical and real-productive categories:
to quote more or less from the critique of Adolph Wagner,
  profit on capital is not a constitutive element,
yet the value not constituted by the labour of the capitalist
conceals a portion which he can appropriate legally

2.  Equilibrium economics cannot think dialectically.
It simply cannot think society as a whole and as a real temporal
process. Its remains an impotent or passive spectator
to the reproduction of society by social productive
labor, 'constrained by itself by the need to produce again'*,
and as a consequence of contradictions immanent to that self-
constricted process of social re-production, to change the form
of society itself.

Neo Ricardianism captures reproduction (and so may be
superior to neo classical economics as Pasinetti and others argue)
but absents real temporal process and development.
For Marx the question is why the reproduction of
bourgeois society itself depends on growth and development. Or why
as Schumpeter put it a stationary capitalism is a contradiction in terms

Neo Ricardianism is at best only half dialectical. So the whole
project relies on Pasinetti
for vindication (and his disequilibrium growth theory
of underconsumption), yet he's hardly discussed as compared to Sraffa.
This baffles me.

I'm also a bit bewildered by your choice to do battle so deep into enemy
terrain. Wouldn't a simple reconaissance mission have sufficed?


*quote from John Torrance

>Hi Ajit
>I'm not sure whether my answers to your earlier criticisms have
>satisfied you. Do I take it that these new criticisms imply that they
>What is your reaction to the illustration, in the very simplest case
>of a corn economy, that Sraffian labour-value accounting is not
>conservative? that the labour-cost accounts do not balance? that some
>labour actually performed is not counted?
>Whether this labour should or should not be counted is a separate
>question. But the very existence of this question is new.
>>(1) Let's suppose that workers wages in period t is
>>not 0.001 tons per hours of labor but rather 0.0005
>>tons of corn per hrs. of labor. This will give you a
>>surplus of 6 tons of corn. However, your capitalist
>>consumption is a given datum from the past, which is 4
>>tons of corn. Now, all of a sudden you have 2 tons of
>>corn that your accounting principle is unable to deal
>>with. In other words, your accounting principle
>>becomes self-contradictory.
>Your recourse to non-equilibrium counterfactuals begs the question:
>how do you know that Sraffa's labour-cost accounting can deal with
>non-equilibrium when its ability to deal with equilibrium is precisely
>what is being questioned?
>Such counterfactuals are not relevant to our discussion, which has
>been carefully limited to a state of self-replacing equilibrium,
>precisely the special case in which the "transformation problem" is
>thought to arise.
>There is some irony in your recourse to non-equilibrium or dynamic
>considerations in your defence of Sraffa's labour-cost accounting,
>given your criticisms of the TSS attempts in this direction and your
>stated belief that a dynamic theory of value is logically impossible.
>For example, you don't allow the TSS school to attempt to avoid the
>transformation problem by recourse to non-equilibrium; why then should
>you be allowed to attempt to avoid Sraffa's labour-cost accounting
>error by recourse to non-equilibrium? The location of the debate is
>self-replacing equilibrium.
>I do not have a theory of the dynamics of simple reproduction. Let's
>not pretend that Sraffa does. Hence, your objection (1) I think is
>>(2) How can you deal with this? You may try to put a
>>condition on your system that does not allow such
>>possibility. You may say that my example violates your
>>assumption of simple reproduction schema. Before we
>>get to what this assumption implies, note one
>>immediate conclusion: This situation must arise in all
>>expanded reproduction schemas--where your accounting
>>principle logically breaks down.
>Your example does violate the major assumption of our whole debate,
>which is why I do consider it irrelevant, as you predicted.
>I'm surprised that you state that real-cost accounting cannot deal
>with expanded reproduction with such confidence. I know it can handle
>the situation of balanced growth along the von Neumann ray with zero
>capitalist consumption. I also think it will generalise to balanced
>growth with non-zero capitalist consumption, although I haven't worked
>on it. Yet you appear to be, quite remarkably, ahead of me on this
>line of research. Granted, disproportionate growth and structural
>change are quite another matter; but this also leads to dynamics,
>which leads us far away from the premiss of our discussion.
>Hence, your objection (2) I think is irrelevant and also partially incorrect.
>>(3) Given your position that capitalists' necessary
>>consumption is out of last round of production, your
>>assumption of simple reproduction schema implies that
>>the given system with its given wages and profits must
>>not only remain frozen for all conceivable future but
>>also it must have been frozen for all conceivable
>>past. In other words, the corn equation with its wages
>>at 0.001 tons of corn per hr. of labor must exist from
>>the big bang to eternity! Because, anywhere in the
>>past or the future if the system diverged from this
>>frozen state, it can do only by breaking your
>>accounting principle.
>In the modern context of vertical integration, labour-values are a
>variable of economic state, not economic history. This is reflected in
>the difference between replacement cost and historical cost. For
>example, just because a set of weighing scales is in balance does not
>imply it has been in balance forever.
>However, if you measure the weights on the LHS arm and the weights on
>the RHS arm you would find them to be equal in equilibrium (unless you
>count as the neo-Ricardians do).
>In the special case of self-replacing equilibrium the distinction
>between historical cost and replacement cost is effaced. The
>trajectory taken toward the equilibrium state is "forgotten" and the
>history dissipates. A big, unchecked assumption of the whole
>neo-Ricardian critique is that a state of profit-equalisation is
>stable (this follows from the assumption that Sraffian prices are
>actual, rather than counterfactual, prices). In consequence, the
>analysis of a self-replacing equilibrium, contrary to what you say
>above, does not imply that such a state necessarily exists from the
>"big bang to eternity". To make this kind of statement you need
>dynamical laws, a feature entirely absent from Sraffa's theory.
>So your objection (3) is incorrect.
>>(4) Up till now I have not mentioned Marx in this
>>context, simply to keep the focus on the logic of the
>>issue rather than create emotional outbursts and
>>quotation mongering.
>Thank you for that -- and also thanks to Allin for holding off on this
>line of discussion.
>I do not want to enter into a debate on objection (4) just yet because
>I think it has the potential to quickly degenerate, and obscure the
>question regarding Sraffa's labour-cost accounting and the modern
>(simultaneous) form of the transformation problem.
>Best wishes,

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