[OPE-L] value theory

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Sat Oct 27 2007 - 21:10:24 EDT

I was kicked off the list more a week ago by Levy 
before the AC was consulted--just to explain why 
the following notes are late coming. I know that 
one AC person did not find grounds for my 
suspension or expulsion, and I am betting at 
least one other did not as well. They are free of 
course to take issue with Levy's moderation of 
the list. I  however cannot denigrate Levy's 
performance without being kicked off the list or 
respond to his posts in any way, so let me ask as 
a matter of general principles why suspensions 
and expulsions are not preceded by a vote by the 
AC which would allow the accused party to make a 
statement before the votes are cast. I had 
assumed that this is how the list is moderated 
but if this is not true, perhaps some 
clarification of list policy--which of course I 
would dare not challenge!--would be in order.

OK on to substance (while we are waiting for 
Simon's response to the Freeman and Kliman reply).

1. Gary says that "Marx's starting point after 
all was a static model of simple reproduction." 
But as Allin and I showed (and Grossman before 
us) Marx demonstrated that simple reproduction 
would be most unlikely under capitalist 
conditions. So why Marx's value theory has to 
hold in simple reproduction is not at all clear 
to me. I am confused why the test of simple 
reproduction is so important to both Gary and Ian 

That the interdepartmental relations disclosed 
through analysis of simple reproduction would 
have to hold more or less in expanded 
reproduction in a closed capitalist economy does 
not mean that the capitalist economy can ever 
settle into simple reproduction (or arrive at 
static equilibrium).  In fact Marx argues that it 

2. Also I think we need to clarify what long term equilibrium is
--is it a process through which differential 
rewards for those holding the same factors of 
production tend to be eliminated? E.g rate of 
profit tends to be equalized across branches
--is it an ongoing process in which the most 
efficient techniques come to determine normal 
--is it an end state in which there is a set of 
efficiency prices in static equilibrium?

I see no evidence that Smith, Ricardo or Marx 
understood normal price or price of production or 
supply price as the third kind of thing. 
Competition for them was a dynamic process, not 
an end state. Which is a neo classical conception 
rather than classical conception. I think I agree 
with Anders on this.

3. I am wondering whether we can agree that Marx, 
rightly or wrongly, would have understood the 
Sraffian theory as crude material fetishism he 
ascribed to McCulloch. It seems useful to me to 
try to figure out what Marx would have thought 
about the physical conditions/surplus approach

John Eatwell writes

" ..The objective analysis which Sraffa sought he 
found in the surplus theories of Ricardo and 
Marx. The classical theory of value and 
distribution takes as its starting point 
quantities which are all, in principle, 
objectively measurable, and behind those 
quantities lie the objective characteristics of 
social institutions. There is no place for 
utility or disutility. For example, labor 
requires a given quantity of commodities as 
wages, and this must be replaced from the 
product. The wage is a set of physical 
magnitudes, its determination rooted in the 
character of contemporary society. It is not a 
measure of how the worker subjectively feels 
about working. Orthodox theory asks us to believe 
that real cost is the sum not only of the 
disutility of labor, but also of the subjective 
pain suffered by the capitalists, who must be 
induced to sacrifice their wealth to engage in 
the acquisition of profit." -- John Eatwell 
(1984). "Piero Sraffa: Seminal Economic 
Theorist", Science and Society, V. 48, N. 2 
(Summer): 211-216."

  Eatwell is free to laud this putative 
materialism, but it is important to see why Marx 
would not have.

In Theories of Surplus Value Marx writes:

"According to Hodgskin, circulating capital is 
nothing but the juxtaposition of the different 
kinds of social labour (coexisting labour) and 
accumulation is nothing but the amassing of the 
productive powers of social labour, so that the 
accumulation of the skill and knowledge 
(scientific power) of the workers themselves is 
the chief form of accumulation, and infinitely 
more important than the accumulation-which goes 
hand in hand with it and merely represents it-of 
the existing objective conditions of this 
accumulated activity. These objective conditions 
are only nominally accumulated and must be 
constantly produced anew and consumed anew.
" productive capital and skilled labour are [] 
one." "Capital and a labouring population are 
precisely synonymous" ( [Hodgskin, Labour 
Defended against the Claims of Capital, London, 
1825,] p. 33).
These are simply further elaborations of Galiani's thesis:
" The real wealth  is man" (Della Moneta, 
Custodi. Parte Moderna, t. III, p. 229).
The whole objective world, the "world of 
commodities", vanishes here as a mere aspect, as 
the merely passing activity, constantly performed 
anew, of socially producing men. Compare this 
"idealism" with the crude, material fetishism 
into which the Ricardian theory develops in the 
writings "of this incredible cobbler", McCulloch, 
where not only the difference between man and 
animal disappears but even the difference between 
a living organism and an inanimate object. And 
then let them say that as against the lofty 
idealism of bourgeois political economy, the 
proletarian opposition has been preaching a crude 
materialism directed exclusively towards the 
satisfaction of coarse appetites."

Two points here, the first one long the second short.

A.  The Sraffian theory tries to remain fixated 
on the objective world, the world of commodities, 
the production of commodities by commodities. The 
Sraffians take get pride in this empiricism or 
thingism of wage goods and surplus goods (though 
of course the world is never frozen as it is in 
their equations). But in this economics we have 
fixed inputs transformed into fixed outputs on 
the basis of fixed technology. We have the whole 
objective world, the world of commodities, of 

This reified world never vanishes for the 
Sraffians as a mere aspect of, as the merely 
passing activity, constantly performed anew, of 
socially producing men.

Marx would have described the Sraffian framework 
as a crude material fetishism closer to McCulloch 
than Ricardo! At the same time even though Sraffa 
tries to remain fixated on the world of 
commodities, he is forced to abandon the actual 
and changing world of commodities and retreat 
into a world where nothing changes, time is 
frozen--inputs and outputs are the same and 
technical conditions fixed.

So the theory aims to be materialist but fails to 
be so. It is in fact a Platonic escape from the 
real, material world. It can't allow for example 
product and process innovation, which Schumpeter 
showed to be the heartbeat of capitalism.

As Freeman and Giusanni have long emphasized, 
Sraffa's  equations cannot be solved unless the 
"output" goods are assumed to be the same as the 
input "goods"; moreover Sraffa must assume that 
the output commodities have been produced with 
the same exact techniques as the input goods 
(otherwise input prices cannot equal output 
prices). That is, to get the mathematics to work 
he has to stick fast to things and eliminate 
time. The economy is conceived as having the same 
basket of goods on the input side as the output 
side, and it is assumed that they were produced 
in the same way!

This is not objective or materialist as Eatwell 
and Steedman loudly proclaim but a phantom world 
in which  economists have become more comfortable 
than the real world. The net product is in fact 
not well described as a quantity of use values; 
that only reifies the actually objective and 
truly real unpaid labor time which can take and 
usually does take ever changing concrete forms.

In other words, Sraffa represents a step back 
from the classical economists whom Marx lauded in 
this rather amazing quote from his chapter on 
Richard Jones:

"The phantom of the world of goods fades away and 
it is seen to be simply a continually 
disappearing and continually reproduced 
objectivisation of human labour.  All solid 
material wealth is only transitory 
materialisation of social labour, crystallisation 
of the production process whose measure is time, 
the measure of a movement itself."

The materialism and objectivity that Eatwell 
claims to have found in Sraffa was lost after 
Marx's encounter with the classicals. Sraffa did 
not recover it but tried to give it the final 
burial. Meek, Dobb and Steedman followed him.

B.  as to the origins of surplus value the 
difference between the animate and the inanimate 
disappears in the Sraffian framework as the new 
money value added is attributed to animate or 
living labor and dead labor alike.

At any rate it's no surprise the Sraffians try to 
kill off the labor theory of value as part of 
Marx's discredited humanism.

This is the only way they can stay at the 
empiricistic level of the objective world of 
commodities, not see commodities as a mere aspect 
of, as the merely passing objectificaton of 
activity, constantly performed anew, of socially 
producing men.

4. I am hoping that we can agree that Marx, 
rightly or wrongly, would not have seen the need 
for the standard commodity as an invariable 
standard of value, for he understood the 
purchasing power of the real world numeraire, 
namely gold, to be fixed by its actual value, 
which he also understood or rather stipulated as 
fixed. As distributional changes could not affect 
the purchasing power of the numeraire commodity, 
distributional changes would thus have no effect 
on the size of the pie as measured in the 
numeraire. There is thus no need in Marx's theory 
for the standard commodity.

5. Marx never admitted to having failed to 
transform the inputs from values to prices of 
production. He admitted to an inverse 
transformation problem

6. I would also challenge how AllinC/PaulC on the 
one hand and Ian W on the other hand have handled 
the transformation problem, which is an 
expression of a real contradiction between the 
law of value and the law of profit. The former 
denies that the contradiction exists; the latter 
tries to eliminate it by a clever redefinition of 
labor value. Either way, real contradiction is 
wished away.


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