[OPE-L] That hissing? It's the sound of bubblenomics deflating

From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Mon Oct 15 2007 - 13:12:00 EDT


I fail to see what your problem is. I fully agree that assets less liabilities in a conventional balance sheet must always be zero. But this does not tell us anything about who owns them, and what net income they derive from it, which is the important thing. Financial dealers are interested especially in net asset value, calculated on a daily basis even. 

The value of products in the Marxian sense can never be negative, either it is zero or it is a positive value; debits and credits (including negative and positive profit) exist only in money prices. In Marx's theory, surplus-product can be in principle be positive while profit is negative or vice versa. There is no such thing as "negative surplus-value", only negative profit. 

In Marx's simplified model, if commodity capital is exchanged for money capital, the value of the commodity capital is conserved, and, assuming a MELT and equal exchange, then the money capital and the commodity capital are equivalents, expressible either in money or abstract labour time. The one is a stock of value, the other a claim on value. 

I mean both that the sum of financial assets is greater than the sum of the value of physical assets, and that the sum of the value physical non-productive assets is greater than the sum of the value of physical productive assets. Whether you look at the financial assets as "assets" or as an equivalent amount of "liabilities" does not matter here, we are just talking about one kind of property versus another kind of property, both of which can claim income.

In a national economy, a volume of trade occurs involving purchases and sales. In order to compute gross output, we select a subset of purchases and sales defined as being related to the value of new production and that is the basis of our calculation. It presupposes a definition of the boundaries of production. Thus, for example, a portion of interest, rent and profit is not considered as being related to production, because it arises only out of transactions transferring ownership of existing assets. Imputations are also made for elements of profit, interest and rent which do not really exist (i.e. not part of any real transaction) but which nevertheless are included in the valuation of production. Why must the expenditure, income and product measures of GDP always be equal? Because of the way the transactors are defined, the transactions which are included and the way the grossing and netting is done.  

In Marx's 1850s scheme, the value of gross output equals variable capital expenditure, circulating constant capital consumed, fixed capital consumed, plus surplus value newly created. In national accounts from the 1930s, it equals compensation of employees, economic depreciation, indirect tax on production less subsidies to producers, operating surplus plus intermediate consumption (somewhat similar, but not quite the same thing). Marx's value relations pertain to the gross output, but not necessarily to all trade. Second-hand assets can trade at all sorts of prices, not reflective of their historic cost or current replacement cost in terms of new equivalents.

Why this becomes important, as I have emphasised numerous times, is when trade external to production, from which incomes are derived, strongly increases. Because in that case, GDP provides a distorted view of the total income in the total domestic economy. By the time that more assets of any kind exist external to production than inside it, a flourishing trade can occur external to production to which the principle of value conservation may not apply at all, although it might influence the trade, that is all I am saying. The Marxists focused mainly on gross output of production, whereas capital accumulation is involved in the total volume of trade.

Some items in the product account can in principle be negative values, e.g. the "increase in stocks (inventories)" item. 


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