[OPE-L] "Levels of abstraction"

From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Mon Jan 28 2008 - 15:07:35 EST

Hi Dave,

To be precise, the transformation problem assumes that surplus value is not differentiated into profit, interest and rent, and that all capital flows pertaining to production can be categorised as C, V or S or combinations of these.  The (average) profit rate is however always struck by Marx on the basis of a distribution of the realised surplus-value which are fractions of a total amount of surplus value available for distribution. I agree many different profit measures are possible, but if no systematic relationship between surplus value and profit is specifiable, the concept of surplus value is redundant, since all we are talking about is profit grossed or netted in different ways, as related to productive assets valued in different ways.

I have no evidence that Marx thought that total profits and total surplus values obtained from production were strongly diverging magnitudes, rather, he assumes that their magnitudes will be "approximately" equivalent. His reason for that assumption would seem to be that if total surplus values and total profits were strongly diverging magnitudes, then it is difficult to prove any systematic relationship between labour-values and market prices such that price-value deviations follow any definite pattern (at least "towards" cancelling each other out, such that prices and values converge, resulting in an exchange of equivalents or near-equivalents). 

Of course, there is a difficulty in interpreting the meaning of the idea that total profits equal total surplus values. Ultimately it implies that total production prices expressed in gold=total value in aggregate; since however "values" can only be expressed as quantities of labour-time or prices (or trading ratios) this boils down to the idea that a certain aggregate money-price equals a certain aggregate quantity of labour-time (which is the basis for the MELT). But if, due to unproductive labour costs, total price and total value necessarily strongly diverge by definition, how could one estimate a MELT at all? One would need a function of some type to express the differential, but what is the basis for this?

Shane Mage whose pioneering Phd thesis I mentioned before, recently argued (on PEN-L) that:

"Marx makes it quite clear that the wages of "socially necessary but unproductive" labor are paid out of [the circulating portion of] constant capital. While to the individual capitalist  they appear to be a deduction from surplus value, to the capitalist system as a whole they are part of the overall cost structure.  This was demonstrated 45 years ago in Ch.3 of my dissertation.  Thus, because these wages consist of part of the gross product, the higher their share of the total wage bill the lower the share of the gross product available to the ownership class for consumption and investment, and accordingly the *lower* the rate of exploitation."  http://archives.econ.utah.edu/archives/pen-l/2008w04/msg00014.htm

However this argument still doesn't quite clinch it, and not just because Marx never explicitly says (to my knowledge) himself that unproductive labour costs are paid out of Cc:

(1) It does not explicate what the final source of the wage income of unproductive labour is, and therefore it could still be argued that every increase in unproductive labour implies a higher, not a lower, rate of exploitation for productive labour, insofar as the wage income of unproductive labour is funded from gross income generated by productive labour. In other words, the ability to hire more unproductive labour depends structurally on the ability of productive labour to generate more additional value. Indeed, it might be argued that the appropriations of unproductive labour constrain the wages of productive labour. One putative (simplistic and probably false) solution might be to argue that productive labour is paid from the current value it creates, whereas unproductive labour is paid from capital advanced, in which case the current wage bill of unproductive labour is never due to current value generated by productive labour.

(2) As a corollary, it does not explicate whether or not the wage bill of unproductive labour should be treated as a component of the current value product or not. For Marx, the value product (VP) equals the sum of variable capital and surplus value, i.e. VP = V+S. Since, on the Mage definition, the wage bill of unproductive workers is neither V nor S, but Cc, it follows that this wage bill cannot be a component of the value product (the new value created). That is a coherent argument. If however this wage bill is not a component of the value product per se, in what sense then can it be a "deduction from surplus value"? Because what Mage really says (at least that is my reading), is that it is not a deduction from surplus value per se, but a deduction from the value product, or if you like, a deduction from the net value added.

(3) Mage acknowledges that the wage bill of unproductive workers is a component of gross product. This means we cannot exclude it from the valuation of gross product altogether, it is a component of its cost structure. But this does not specify clearly how the gross product itself should be defined. If this wage bill is Cc, is it an item of intermediate consumption, or is it part of the net product in the same way as economic depreciation? This affects how we regard the final value of new outputs, and in an income sense it does matter also, since the net product should define the total income receipts generated by production, netted of intermediate goods and services used up to make them (in practice, it abstracts from land rents, leasing etc.). The only credible solution from a social accounting point of view seems to be to include this wage bill as a Cc item in net output. The stock valuation of this item should then enter into the denominator, not the nominator of the ratio S/C+V.

(4) It does not explicate clearly the difference between a "deduction from surplus value" and "a part of the overall cost structure". This evades the question again of whether the deduction is itself a financial claim on current surplus value generated, or whether it is a cost which by definition is never part of surplus value at all, because surplus value is defined ex post the deduction, a deduction viewed as a cost. Point is, that any real cost of an enterprise can be viewed as a deduction from its income, gross or net, just as anything that adds to its gross revenue is a source of income. Mage implies that in subjective perception it is a claim, but objectively it is a capital cost. If it is a capital cost, it is never a deduction from surplus value.

I am aware that Marx stated that capital could be understood only "in motion", and there is a sense in which a double-entry bookkeeping approach "freezes" the circulation of capital in time. Thus, it may be impossible to approximate Marxian value relations purely from accounting data with any great accuracy, since reality is a moving reality in time. On the other hand, to be able to specify flow values at all, there must be constants, and we must be able to specify at least in theory what the relationship between the total magnitudes is, and how they are defined, in order to be able to identify any empirical indicators at all.

As for Marx himself, he did recognize at least there was a problem, which he thought would be dealt with best in chapter 3 of Cap. Vol. 3 on the relationship of S/V and S/C+V. Thus, in a fragment on "Net and gross product" included in the Resultate manuscript, he writes sarcastically for instance that "the theory of the net product as the last and highest purpose of production is no more than the brutal but accurate expression of the fact that the valorization of capital, and hence the creation of surplus value without heed to the worker, is the driving force behind capitalist production." (Penguin ed. Cap. Vol. 1, p. 1051). In Cap. Vol.3 chapter 3, he says explicitly that he assumes throughout chapters 1-7 of Part One that total surplus value equals total profits, ignoring its components ""interest, ground rent, taxes etc.". The investigation is therefore in the first instance "a purely mathematical one" (both bits quoted in Penguin edition, Cap. Vol. 3, p. 141). In chapter 8, he acknowledges that the assumed identity abstracts from certain variations in the turnover time of capital, more specifically the release and tying up of new capital investments in response to price fluctuations. 

It can be argued that Marx only describes a simplified model which abstracts from certain factors, but isn't the national accounts system devised by S. Kuznets and R. Stone also a "simplified model" in this sense, assimilating a complex reality to a finite number of related categories? The least we might expect from an economic theory of the capitalist economy, is that it is able to specify the structural relationships between all observable transaction types. In the final analysis, Peter-Utz Reich concludes in his book "National Accounts and Economic Value" that national accounts rely on a theory of economic value which implies that macro and micro levels are not easily reconcilable (haven't read this book yet, but it's fair comment).

Anyway, I'll take a break from all this now.


Approaching Viagra capitalism 
Consumed by its own metabolism
Take a credit pill to survive
Anything for life, for life
Viagra capitalism approaching
Managers to give a coaching
Push come to shove
Anything for love, for love
All I try for is some sense
The irritation of your pants
A memory of things once held
A sniff of perfume that I smelt

Approaching Viagra capitalism
Revealing its own anonymism
Anything to survive, survive
Whatever happened to my wife
Viagra capitalism approaching
Fear and trembling, full of loathing
Time waits for no one, slips away
Time to shine, or fade away
All I try for is reality
But what it is, a fantasy
If I'm not already dry
I believe I'm gonna cry

Approaching Viagra capitalism
Antithesis is socialism
The word itself may not be heard
I can't pronounce the very word
Viagra capitalism approaching
Global warming's roasting
My only friend it is the sun
And if it shines we could have some fun
All I try for is some luck
But if it's hate well then I duck
And if I'm dry I'll fry, I'll fry
The world's a lie, I die, I die.

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