Re: [OPE-L] SV: [OPE-L] what is irrational in the functioning of capitalism?

From: ajit sinha (sinha_a99@YAHOO.COM)
Date: Fri Dec 01 2006 - 17:46:14 EST

--- clyder@GN.APC.ORG wrote:

> Quoting ajit sinha <sinha_a99@YAHOO.COM>:
> > allow you to move another step. Now, the
> proposition
> > Marx is making is not that empirically profits and
> > surplus labor are observed to go together but
> rather
> > the *cause* of profit lies in surplus labor. This
> > proposition is simply asserted but never proved by
> > Marx.
> Marx proves it subject to the proposition that
> exchange
> value is proportionate to labour content. This
> proposition
> is taken over from classical political economy, and
> as
> such did not have to be proven against then existing
> opponents. To demand that in the 1860's he addressed
> alternative approaches to value that came into being
> later is surely anachronistic.
Paul, this is a myth. Don't believe in myths. Let me
first quote to you one para from my chapter on

[However, after admitting that labor is not the sole
cause of variation in the value of commodities and
that changes in distribution was another cause of
variation in value, Ricardo goes on to argue that the
variations caused by changes in distribution is of
minor magnitude compared to the variations caused by
the changes in labor expenditure. He considered that
in the real world changes in distribution cannot cause
more than six to seven percent changes in relative
values and thus for all practical purposes it could be
ignored in considering the cause of changes in the
values of commodities:

"The reader, however, should remark, that this cause
of the variation of commodities is comparatively
slight in its effects. With such a rise of wages as
should occasion a fall of one per cent. in profits,
goods produced under the circumstances I have
supposed, vary in relative value only one per cent.;
they fall with so great a fall of profits from 6,050l.
The greatest effects which could be produced on the
relative prices of these goods from a rise of wages,
could not exceed 6 or 7 per cent.; for profits could
not, probably, under any circumstances, admit of a
greater and permanent depression than to that amount.
… In estimating then, the causes of the variations in
the value of commodities, although it would be equally
incorrect to attach much importance to it; and
consequently, in the subsequent part of this work,
though I shall occasionally refer to this cause of
variation, I shall consider all the great variations
which take place in the relative value of commodities
to be produced by the greater or less quantity of
labour which may be required from time to time to
produce them" (p. 36-37).

This has led Professor Stiglar (1958) to characterize
Ricardo’s theory as 93% labor theory of value. It
should, however, be noted that Ricardo’s statement
only refers to the cause of change in the relative
values. As far as the divergence of value ratios from
their labor ratios due to differences in time
structure of capitals is concerned, it could be
considerable. It should also be noted that Ricardo’s
results have no general validity and are the products
of his particular example. The variation in values
could be much larger if Ricardo started from much
higher rate of profits and thus allowed a larger fall
in it. Furthermore, the variations in value would be
much larger the two goods were far apart in terms of
their composition of the direct and indirect
labor-time. As a matter of fact, Ricardo was well
aware of it and in the first edition of the Principles
he had worked out examples of variations in relative
values of two commodities produced by equal amount of
capital investment but one produced by labor only and
the other produced by machine only. Ricardo showed
that a fall in rate of profits from 10% to 3% would
cause the relative values to vary “68% if the machine
would last 100 years; 28% if the machine would last 10
year; 13% if the machine would last 3 years; and
little more than 6% if the machine would last only 1
year” (Works I, p. 60).  It appears that Ricardo’s
comments in the third edition relate to the relative
value deviation from his chosen ‘money commodity’,
which was supposed to be produced by a capital
composition close to the average of the ‘most of the
commodities produced’, leaving out the extreme cases.]

Later on I show that contrary to Stiglar's thesis
Ricardo's theory of value was analytical and not
empirical in nature. In any case, no major political
economists (such as Adam Smith, J.B. Say, T.R. Malthus
and David Ricardo) believed that price ratios of
commodities were determined by labor-time ratios. The
two I know who thought this way were James Mill and
McCullouch and Ricardo explicitly in writing tells
them that he disagrees with them. Marx, of course, did
not have much respect for either of them. As a matter
of fact Marx is very proud of his theoretical
distinction between values and prices of production
and nowhere he tries to claim that the divergence of
prices of production from labor-values would be minor
one and so labor-values could be taken as a good
empirical theory of price determination. So your
subject to the proposition does not hold, and there is
no proof provided by Marx.
> This does leave the interesting scientific questions
> 1. Was classical political economy right in assuming
>    that actual exchange values were closely
> proportional
>    to labour content.
But they never did. This is just unsubstantiated
> 2. If this is the case, why is it the case.
> We now know that 1 is true, which leaves question 2.
No! 1 is not true, so 2 is irrelevant.
> I think an adequate theory was provided by Farjoun
> and Machover. They use statistical mechanics to give
> a theoretical explanation for the regularities that
> classical political economy had observed and taken
> as
> givens. So we do now have a 'theory of horses', even
> if the classicals worked largely on the basis of
> observed
> regularities.
To say that classical political economists had
observed LTV and had taken it as given is simply
preposterous! Now, I don't care about Farjoun and
Machover's theory as long as you call it by their
name. The problem arises when all kinds of people come
up all kinds of theories and then tell me, 'you know
what? This is Marx's theory of value' as if the rest
of the world is totally illiterate about Marx's theory
of value. Why can't people come up with their theory
of prices and call it by their name and see whether it
floats or sinks? Why all kinds of things must be
imputed to Marx? And Marx had no theory of horses,
> As I understand it, Ian has an additional theory of
> his
> own as to why the law of value holds, one whose
> logical
> consitency he has subjected to the test of
> exhaustive
> simulation, so you are being a bit harsh when you
> say
> he has no theory.
I don't know Ian's theory. I was referring to his
logical argument about his theory of horses. I might
not be able to respond for sometime as I have to get
little busy with preparing for my seminar and other
research work. So I hope you will not mind if I don't
respond immediately. Cheers, ajit sinha

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