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

From: Ian Wright (wrighti@ACM.ORG)
Date: Tue Jun 27 2006 - 16:48:35 EDT

Hi Ajit

I guess this thread is nearing its natural conclusion, particularly as
we are both beginning to repeat ourselves and perhaps exhausted the
patience of listmembers. You asked some specific questions in your
last message, which I will answer.

> Didn't everybody know that in a no-surplus economy the labor
> theory of value gives the right exchange rations?

A closed model of simple reproduction is not a "no-surplus" economy.

The neo-Ricardian critique of Marx's LTV is that the LTV holds in
simple commodity production (zero profits) but not in simple
reproduction (non-zero uniform profits), i.e. the crux of the matter
is competitive prices and equal returns to capital invested. I have
not encountered the claim that Marx's LTV holds in a no-surplus but
fails in a surplus economy.

> Actually, you don't need to introduce labor at all in
> your system. You can do the whole exercise in terms of
> materials as Sraffa in chapter one does. So what kind
> of defense of labor theory of value this formal system
> can produce?

In an important sense the solution of the TP is simple and obvious
once the reason for its existence is understood. In the modern
context, there is a TP because the adopted labour-cost accounting is
non-conservative. Once this accounting error is fixed, and the
replacement costs of commodities properly calculated, then real-costs
in general, including labour-costs, are conservative in price. The
real-cost symmetries in Sraffa's "subsistence" equations of Ch.1 are
then restored in Sraffa's "surplus" equations of Ch.2. Hence, Ch.2
does begin to look like Ch.1 again, on condition Sraffa's surplus is
both nominally and physically distributed.

Sraffa's open representation of an economy, with an undistributed
surplus, severs the connection between money-capital and its
real-cost, what I call an interruption of the circular flow. Hence, a
whole recursive path of vertical integration is missed. If we don't
vertically integrate over the real-cost of money-capital, and actually
count the indirect labour required to manufacture capitalist
consumption, you lose conservation of real-cost in price. Hence,
something called a "transformation problem".

The analogy to conservation laws in other areas of science is very
close. In physics, it took some time for the idea of conservation of
energy to really take hold (for example, see Meyerson's "Identity and
Reality", itself a major influence on Mirowski's brilliant
contribution to value theory, "More Heat than Light"). The principle
of the conservation of energy was not deduced from definitive
empirical evidence. The elaboration of the principle was more a
conceptual matter, which included accounting for the `missing' or
`lost' energy, in the form of heat, sound, etc., during energy

> Though Sraffa is not designed to study
> technical change, you must know that he is able to
> handle it quite well as he does in his chapter on
> land. The point is that treating of technical change
> as magic is childish.

The idea that labour can alter its productivity without the
introduction of new machinery is not "childish", particularly in the
context of a 1-d corn economy. I agree that single-production Sraffa
is not designed to handle technical change. But single-production
Sraffa is also not designed to handle changes in the *real*
distribution of income, which you introduced as a critique. In
general, a change in the real distribution of income is a change in
the composition of the net product. For this to make sense we must
assume constant returns to scale, which violates Sraffa's theoretical
assumptions, unless we introduce technical change.

I am working within Sraffa's assumptions. This is why I characterize
your introduction of changes in real income, as a critique of my
construction of the circular flow from Sraffa's surplus equations, an
"external" critique of Sraffa's framework. You are highlighting some
limitations of Sraffa's approach, and so my response is a shrug of the
shoulders. I agree there are important limitations to trying to
understand an economy in terms of linear algebra, particularly if the
interpretation of that algebra has metaphorical tensions (e.g.
circular flow vs. undistributed surplus). The economy is irreducibly a
dynamic system. My justification for working within this static
framework is that it needed some "debugging", particularly when
applied to Marx's LTV and his conservation laws.

Best wishes,

This archive was generated by hypermail 2.1.5 : Fri Jun 30 2006 - 00:00:03 EDT