[OPE-L] Question

From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Mon Apr 02 2007 - 14:50:33 EDT

Hi Fred,

You wrote:

This is the only way that there can be a quantitative ?difference? between
the ?value? and the
?cost price?, which is emphasized in Marx's paragraph and by Jurrian.

Thank you for your comment, but I am not sure yet if I agree. Seems to me,
categorically speaking:

(1) that Marx theorises the operation of the law of value in capitalism in
four dimensions, namely labour-time worked to produce a product,
product-values, ideal product-prices (including production prices) and real
product-prices actually realised. These can evolve with some degree of
freedom from each other, and precisely their deviations are of critical
importance in the competition process, and shape that process. You need all
four dimensions to make sense of it.

In my view:

(2) product-values and labour-time worked to produce them are not identical
expressions, because product-values do not really refer to the actual amount
of labour-time (direct and indirect) required to produce the product, but to
the current social average or modal average labour-time. Marx suggests that
there is a differential between the enterprise labour-cost and the socially
average labour-cost for the product, and that this again is of critical
importance in competition.

At issue with the quote is (I thought) is:

(3) the difference between "potential" surplus-value and "realised"
surplus-value. The former is a value, the latter is a price. Of course, the
formula C+V+S can be always construed to refer either to quantities or
labour-time, or product-values or product prices (real or ideal). Marx is
often a bit sloppy in his expression here, and he often does not adequately
distinguish between capital advanced and capital consumed (although in Cap.
3, ch 1 he does define the difference). But apart from sloppiness, the
reason for combining values and prices in one equation is that he does not
simply want to "make general reflections on this unity [of production and
circulation]" but "to discover and present the concrete forms which grow out
of the process of capital's movement considered as a whole" (p. 115). And
values and prices operate in tandem here.

If we say, as Marx summarises, that:

"As long as its sale price is above its cost price, even if below its value,
a part of the surplus-value contained in it is always realized, i.e. a
profit is made"

then it seems to me, we are BOTH talking about prices AND about values, and
about the relationship between them (to express that quantitatively, we
really require ideal prices). The "value" here can be defined either as the
actual direct and indirect labour-time required to produce it by the
enterprise, or as the socially average labour-cost for that type of product,
or as an ideal price. I realise this can give rise to conceptual

Marx implies (I think) that the cutting edge of competition (and
consequently the ultimate dynamic of the law of value in capitalism)  is to
sell a product below its socially average value, yet with a profit rate
higher than the average. In other words, you use less labour and material
than average to produce it, enabling a profit margin higher than average,
even although you still sell the product below the ruling market prices, and
below the socially average product-values. Because you therefore have more
sales and faster turnover, your profit margin is higher in the same
accounting period.

The inverse case would be an above-average (surplus-) profit made through
selling "above value", based on supply or demand monopolies of some kind.
But a monopoly obviously also makes possible underselling would-be
competitors in the given case.

The basic economic reality behind all of this, is that until the product is
sold, it is uncertain how much surplus-value will be realised, although in
aggregate we might say that X amount of value has been produced at a certain
capital cost, and thus that only Y amount of surplus value can possibly be
realised by the producers (the mass of profit realised and the surplus-value
produced are at least approximately the same, which is what Marx claims to
be an empirical fact - at least, no more profit can be realised from
production than there exists newly created surplus-value from production,
although less could contingently be realised).

So there is both the potential surplus value (value concept) and the
hypothetical profit (ideal price), and there is the realised surplus value
and the realised profit (actual prices). But even although not all the
surplus value included in the product-value of the new commodity may be
realised by the producer, it is nevertheless possible that the producer may
obtain an above-average profit. In this case, you simply sell more at a
lower price and a lower production cost with a higher turnover, so that your
profit margin is nevertheless still higher than the average.

We know that there exists no perfect competition, because competition also
involves blocking competitors in various ways (including protectionism,
regulation etc.). But it appears to me that Marx is suggesting that in pure
("cut-throat") competition, the ultimate challenge is one of selling below
value, at an above-average rate of profit, that is the basic tendency of the
system. With an above-average S/V, a lower C input cost, and a higher
turnover, this is in principle possible, even if you have to import from

In this interpretation, it would be wrong to say that the mass of
surplus-value is "redistributed" from a "pool" according to the capital
outlays involved, although it may look like that if we decide to model a
uniform (general) profit rate. It is not true, that some producers really
hand over a chunk of newly produced value to other producers in the same
accounting period.

Instead, it is only that some enterprises realise more of the potential
surplus-value as profit than others, given a ruling price-level for the
product, but the extent to which they can do this, depends precisely on the
prevailing value relations in society which they have to work with, and
which they do not control (they can control only part of what happens, in
their own enterprise). These value relations exist as objectified
(objective) relationships, regardless of whether they are expressed in
prices or not, simply because producing a certain type of product really
incurs a certain cost in labour-time to produce.

The reason why we would talk about "product-values" here at all, rather than
about ideal prices, is I think that these product-values are an objectified
reality, whereas ideal prices are only computational constructs used only
for valuing purposes and to explain the relationships involved. If a product
takes X amount of labour to produce, this is an objective fact influencing
economic behaviour regardless of what anyone thinks, not an idealisation.

Suppose we drop the notion of objectified value (value as objective reality)
altogether, we assume value is purely subjective, and that there are only
negotiated prices. In that case, John Eatwell's delightfully worded scenario

"Since the markets are driven by average opinion about what average opinion
will be, an enormous premium is placed on any information or signals that
might provide a guide to the swings in average opinion and as to how average
opinion will react to changing events. These signals have to be simple and
clear-cut. Sophisticated interpretations of the economic data would not
provide a clear lead. So the money markets and foreign exchange markets
become dominated by simple slogans--larger fiscal deficits lead to higher
interest rates, an increased money supply results in higher inflation,
public expenditure bad, private expenditure good--even when those slogans
are persistently refuted by events. To these simplistic rules of the game
there is added a demand for governments to publish their own financial
targets, to show that their policy is couched within a firm financial
framework. The main purpose of insisting on this government commitment to
financial targeting is to aid average opinion in guessing how average
opinion will expect the government to respond to changing economic
circumstances and how average opinion will react when the government fails
to meet its goals. So "the markets" are basically a collection of
overexcited young men and women, desperate to make money by guessing what
everyone else in the market will do. Many have no more claim to economic
rationality than tipsters at the local racetrack and probably rather less
specialist knowledge." http://www.prospect.org/print/V4/12/eatwell-j.html

Of course - and this  is important - Marx I think never denied value does
have a subjective characteristic beyond having an objectified
characteristic. In the last instance, valuing human subjects are required
for value to exist at all.

If we imagine a stock of products and assets existing without any people
existing anywhere, not an atom of value would I think exist.

Marx says specifically in this regard at the beginning of Vol. 3 that "The
configurations of capital, as developed in this volume, thus approach step
by step the form in which they appear on the surface of society, in the
action of different capitals on one another, i.e. in competition, and in the
everyday consciousness of the agents of production themselves" (Pelican
edition, p. 117). In other words, the theory includes this "everyday

The fact, that objectified product-values exist regardless of the valuations
of individuals, does not I think imply for Marx that value has no subjective
aspect. It does, necessarily. But one aim of his theory of value is
precisely to explain the consciousness people have of economic value, with
reference to an objective reality that gives rise to it, and which exists,
as it were, "behind the backs of the producers".

The active, subjective aspect of value is emphasised by George Soros:

"Every market participant is faced with the task to estimate the value in
the present of a future development of events, but that development is
co-determined by the value which all market participants together attribute
to it in the present. That is why market participants are forced to be led
partly by their subjective judgement. Characteristic of that bias is that it
is not purely passive: it has influence on the course of events which it
should represent. This active aspect is lacking in the concept of
equilibrium such as is used in economic theory." (George Soros, "The Crisis
of Global Capitalism" (1998), Chapter 3, Dutch edition, p. 83).

That is correct, as far as it goes. But Marx would add, "market participants
are also continuously forced to adjust their actions by objectified value
relations which exist regardless of their will". In Soros's view, the reason
why "market participants are forced to be led partly by their subjective
judgement" is because the aggregate outcomes are in part indeterminate or
unknown (they depend on what people will actually choose to do now and in
the future), i.e. because "you don't know exactly what the market will do".
But obviously this subjective judgement would be worth nothing at all, if it
had no predictive power, if it was all one big gamble in a chaos. What Marx
suggests is that the subjective judgement is not arbitrary or
magical/mystical, precisely because objectified value relations exist at any
time, and these enable us in principle to understand market dynamics and
predict at least to some extent what will happen. Not necessarily because
market actors are rational, but because they are caught up in the social
rationality of capital accumulation to which they wil adjust, like it or

The problem with equilibrium theory is that it only tells us that a
price-level exists at which supply and demand will balance, and that markets
tend towards this price-level. But it tells us nothing about the actual
socio-economic process through which this balancing act occurs, nor is there
any empirical evidence that equilibrium exists other than that prices stay
constant in time or grow at proportional rates. Since prices rarely stay
constant in time, and are prone to fluctuations, the amount of empirical
evidence for equilibrium is very small indeed. I think that what Marx tried
to do with his law of value, and associated categories, is to explain how
the balancing (really, "calibrating") process actually occurs. It requires
no reference to equilibrium, only to the idea that supply and demand will
tend to adjust to each other; prices might stay relative constant although
plenty human needs are not met.

I have another job to do, so may not be able to discuss further for a few



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