Re: [OPE-L] Value and price (again)

From: Jerry Levy (Gerald_A_Levy@MSN.COM)
Date: Sun Mar 04 2007 - 11:16:46 EST

>  Point (1) is that in real business, ideal prices and current sale prices
> for
> that commodity are data, which are being used at every stage from
> production
> to sale, i.e. the producers operate within a certain "price regime", in
> which real or ideal money-units act as an ongoing yardstick to indicate
> the
> commercial viability of the proceedings, and account for the capital
> involved. Even here no mathematical perfection is possible, insofar as
> prices change over time, costs are not completely quantified or open to
> interpretation, losses of some kind occur during the process, transaction
> charges apply, there are misinterpretations or calculation errors, the
> time-factor changes prices etc. Nevertheless money-prices are the most
> exact
> measure practically possible, and the bottom line is that the commodity is
> sold for a specific actual price. At all stages, an active process of
> "valuing" is thus going on (these days finance controllers talk about
> "value-based management").

Hi Jurriaan:

I don't have a lot of time now so I will only be able to make a few comments
on your posts -- which is unfortunate because they deserve more attention.

First, a general comment which I've been thinking about. It's not a response
to what you wrote in this particular post per se but to many of your other
posts.  I hope that you consider it to be a constructive suggestion.  I've
noticed over a period of many years that many of your posts (not this one)
have a similar form:  you endeavor to show that a topic is more complex than
commonly theorized by listing (itemizing) various points.  You've done this
repeatedly, for instance, in your posts on prices by calling our attention
to the many layers of ideal and real prices.  I think this is  good
practice --  it tells me that you want to explain the subject more fully and
dialectically through a comprehension of  the many different forms in which
a  subject is observed and can be conceived.  These observations and
conceptions are obviously informed by statistical and historical studies, in
addition to abstract theory.  This is all to the good.  My suggestion to
you --  for what it's worth -- is to take the next step and move from
listing / itemizing to  taking those lists and ordering  those topics by
level  of abstraction, i.e. deciding which is appropriate for which level
of generality or  concreteness.  I think this would help you to organize
and connect your thoughts in a more systematic way.

Re the above:
At the level of abstraction where we are considering the concrete practices
of real businesses, the *form of competition*  must be considered.  The
industrial pricing decisions of firms in oligopolistic branches of
production are not the same as within more classically competitive branches
of production.  There is clearly valuation going on within these firms but
there is no uniform practice and it can not be assumed that the value of
commodities in oligopolistic markets on average equals their price or that
their prices even approximate prices of production. I think one first needs
to make clear which practices are systematically required by firms under
capitalism and then go on to discuss other practices due to contingencies
associated with the form of competition in different social formations.

> Point (2) is that although the ideal and real prices used seem very exact,
> in reality they are changeable and sometimes conditional (subject to
> qualification). It is not just that there may be a discrepancy between the
> potential price and the actual price fetched, but also that the currency
> may be subject to inflation,

A fuller comprehension of inflation requires that we consider the role of
the state (which issues the currency in circulation through central banks
and hence has some ability to impact the supply of money),  foreign
trade (and foreign exchange markets) and the world market.

> that some kind of price negotiation goes on,
> that  the use of credit modifies the prices, that conditions change within
> an
> accounting period etc. Yet, for the purpose of accounting for production
> costs and revenues in an interval of time, we require definite prices
> obtained with a standard procedure.

The 'standard' accounting  procedures used by firms are by no means
standard or uniform and must take into account  state taxation policies,
something which you have recognized in other posts.

> Point (4) is that "aggregate labour hours worked" cannot be established
> with
> exactitude at any level of analysis, even if hypothetically we knew
> exactly
> when every employee clocked in and clocked out for a whole year. Because
> apart from sickies, accidents and the like, we do not know the actual
> amount
> of time each employee is "on task" producing something. In the best of
> cases, "aggregate labour hours worked" is only an estimate.

That's a good point.  There's also the issue of accounting for the labor
time expended in the "underground" part of economies.  This also requires
that we understand state policies.

> Point (5) is that when you think all of this through, as Oskar Morgenstern
> did, you might well ask: how is it possible to have any precise knowledge
> about an economy at all, or even an individual business? All we really
> have
> is the law of averages, ranges of likelihood, margins of error, and known
> norms in describing a trading process in motion, that in reality evades
> the
> sharp and exact definitions such as we might construct.

Thanks for referencing Morgenstern.  (I assume you're referencing, in
particular,  _On the Accuracy of Economic Observations_ although you might
also have been thinking about his much earlier [1937] book _The Limits of
Economics_). He was one of the more critical and thoughtful scholars of his
generation of marginalist economists.  [btw, Gary and I, with Riccardo
listening,  discussed him just last week; we were both undergraduates at
NYU when  he taught there.] These uncertainties, it seems to me, are
inherent in  the commodity-form.

In solidarity, Jerry

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