# Re: [OPE-L] questions on the interpretation of labour values

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Tue Feb 27 2007 - 23:13:21 EST

```>Hi, Rakesh,
>
>
>
>If you think of costs as the product of a mass of means of production and
>means of consumption by a set of prices, your formula for the rate of profit
>allows capital to grow due to two factors: the expending of new labour and
>the inflation of prices. You would thus have profits from the simple passing
>of time, but this expansion would be just "nominal".

Diego, I think it's quite the opposite. My
formula deflates the profit rate vis a vis your
formula, ensuring that capital only grows from
the expenditure of new labour. Assuming a
constant MEL and on going technological progress,
the profit rate is deflated by my using the
replacement costs in the numerator of the profit
rate and historical costs of constant capital in
the denominator.

>If we take C(r) to be replacement costs and C(h) to be historical costs,
>
>why shouldn't the profit rate be measured as
>
>
>Wouldn't that be the way to measure the actual expansion of capital in
>time?

You then write:

>
>
>
>I think that in order to explain the expansion of capital, we should show
>that the rate of profit (M' - M)/M is positive not due to the passing of
>time between M and M' (in the scheme M-C.P.C'-M') but due to ".P.", i.e. due
>to the expending of new labour.

Yes but we should not allow the inflation of the
profit rate by the elimination of time or
backward causality either which is what happens
if we use the replacement costs of constant
capital in the denominator of the profit rate!

>  For this it suffices to look at a single
>day: as the social production process is continuous in time, you have at the
>aggregate level (not necessarily at the individual level) a positive (M' -
>M) everyday, unless something extraordinary happens.
>
>
>
>I think that one difference between Alejandro Ramos and I is that he tends
>to think in terms of the individual capitalist instead of in aggregate or
>social terms. When Marx speaks of "the capitalist", "the commodity", etc.
>(in singular) he is always referring to averages of the respective totals
>and examples of a class. Of course, it makes sense to use historical costs
>for the individual capitalist, but I think that it is not the case for the
>entire capital. If you think of a single capitalist it is possible that the
>price of his inputs does not evolve like the price of his outputs, and this
>can generate a lot of redistributions of profits between individual
>capitalists, either in a sector or between sectors. But in the aggregate you
>will have the same factor of increase due to the change in prices in both
>the numerator and the denominator of the rate of profit.

Yes this is a serious objection. But as I read
Marx's sequential theory, the reduction of output
prices should in the long run only depress the
OCC below the TCC.

Rakesh

>
>
>
>And above all I think that value is the labour needed at present for
>reproducing a commodity.
>
>
>
>Cheers,
>
>Diego
>
>
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>
>----- Original Message -----
>From: "Rakesh Bhandari" <bhandari@BERKELEY.EDU>
>To: <OPE-L@SUS.CSUCHICO.EDU>
>Sent: Monday, February 26, 2007 5:42 PM
>Subject: Re: [OPE-L] questions on the interpretation of labour values
>
>>>Hi, Rakesh,
>>>
>>>
>>>
>>>I would first look at the general case, where fixed capital is present.
>>>In
>>>it, constant capital is the value of the stock of capital. As all values,
>>>it
>>>comes from labour, in this case unpaid labour extracted to workers in the
>>>process of production of the means of production. And as all values, it
>>>is
>>>measured by a certain quantity of money. [Note by the way that there is
>>>no
>>>stock of variable capital; I agree with Duménil in this point]
>>>
>>>
>>>
>>>If we look at the flow of constant capital, I think it is necessary to
>>>use
>>>replacement costs, not historical costs.
>>
>>But. leaving aside the question of how and why money price mis-represents
>>value, why should replacement rather than historical costs be in the
>>denominator the profit rate?
>>
>>
>>
>>I'm trying to understand your difference with Alejandro.
>>
>>Yours truly, Rakesh
```

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