[OPE-L] Queries about Karl Marx vs Adolph Wagner on value, exchange value and price formation

From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Fri Sep 21 2007 - 03:54:26 EDT

The way Duncan Foley put it is, that in order to talk coherently about the
relationship between money price and labour value ("sale above or below
value"), we must specify the relationship between abstract labour time and
money, i.e. the amount of abstract labour time the monetary unit represents.
He calls this the "value of money" but it is in fact the MELT, which Simon
Mohun valiantly has tried to calculate empirically.

Prices "correspond" to values if commodity prices multiplied by the "value
of money" (in Foley's sense) equal the labour-time embodied in the
commodity; prices "deviate" form values if commodity prices multiplied by
the "value of money" are larger or smaller than the labour-time embodied.

The assumption of the MELT is that total net output prices = total net
output value, in which case, if we can relate total net output to the total
labour-time performed to produce it, we can obtain a MELT ratio. However
total net output (i.e. value added), conventionally defined, is only
tenuously related to Marx's concept of the "value product" when we unpack
what it means, and estimating the amount of labour hours performed to
produce it is a very problem-fraught task, not in the least because of the
presence of an ill-defined quantity of "unproductive labour". At best you
can only obtain some empirical indicators there to show a trend. A MELT
could in principle be defined theoretically and perhaps even operationally,
but it is technically impossible to measure it with any accuracy because it
would require base data sets which we do not have; practically every entry
in the product account has to be reworked. So the whole thing remains a
theory, an hypothesis, for which we can only obtain a range of empirical

Value theory is considered redundant in the sense that production prices
cannot be derived from it, via the two famous identities, using the
assumptions Marx himself believed to be important, and they can be derived
in simpler ways by other methods without any reference to value theory.
Marx's "layered" analysis in terms of values, production prices and market
prices may however have a great deal of explanatory, heuristic and
predictive power with regard to actual economic behaviour and the
development of markets. Probably the best way to show that is (1) not by
moving from the abstract theory to the empiria, but from the empiria to the
abstract theory, using the theory as a guide (an uncommon procedure) and (2)
by proving that the manipulation of price data and the analysis of
transactions itself inescapably has to refer to a value theory of a
particular kind (also an uncommon procedure).

If Marx says "price formation does not affect the determination of value in
any way", this seems inconsistent with the TSSI approach, in which prices
and values are mutually dependent. However, Marx seems to forget that price
changes can stimulate increased or reduced labour-expenditure. Of course it
should be noted that Marx's comments on Wagner refer only to Cap. Vol. 1
which was published by that time, not to Cap. Vol. 2 & 3.

I agree with Paul C. that "identifying value input in the transformation
process with money spent" is precisely the problem, if "value input" means
capital conserved, transferred and newly formed in the production process by
living labour.

The problem with Jerry's argument "Means of production and labour power must
be *purchased* before they can become inputs in the capitalist production
process" is that the valuation of inputs is itself defined in terms of
purchases across an accounting interval. Functioning production capital
however has no actual market price, because it is withdrawn from the market
to produce new products. It has only a value and a use-value. What the value
is, is according to Marx not determined by input prices, but by the average
quantity of labour-time it currently represents or is necessary to replace
it under the given market and production conditions. What a business is
really worth as a "going concern" is usually impossible to say, other than
in terms of what somebody is prepared to pay for it, based on estimates of
the relationship between the total investment, the revenue stream and profit
yields. Hence the endless discussions about how capital assets are
"undervalued" or "overvalued", in the market place.


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