Re: [OPE] devaluation and revaluation of variable capital

From: Michael Perelman (
Date: Thu Feb 07 2008 - 21:52:29 EST

In my work on constant capital, I have used this and other quotes like it.  Here is 
an example from an ancient article of mine:

 The most crucial step in his elaboration of the value theory is the shift from 
value as a measure of the sum of the actual labor values used to produce a commodity 
in the past to a new definition of value as the amount of labor that would be 
required to reproduce the commodity today.  In his words: 
  ##[The] value [of a unit of capital] is no longer determined by the necessary 
labour-time actually objectified in it, but by the labour-time necessary either to 
reproduce it or the better machine ....  When the machinery is first introduced into 
a particular branch of production, new methods of reproducing it more cheaply follow 
blow upon blow.  [Marx 1977, p. 528] 
  Reproduction value differs from simple value in one important respect: simple 
values are objective values (presuming that we can measure the previous inputs of 
abstract labor).  In the case of simple values, we treat the lifetime of the capital 
goods as given in advance.  If a machine lasts ten years, we can assume that 1/10 of 
its value is transferred to the commodities produced in a given year.  Each 
commodity that the machine produces will account for a portion of that total value.  
Consequently, to calculate the value of a commodity, we merely have to take the sum 
of the direct labor input and the amount of value transferred to the commodity. 
  In the case of reproduction values, quantitative measurement of value is more 
difficult.  We could even say that it is subjective since capitalists cannot know in 
advance what will happen to the cost of reproducing their machines once they 
purchase them. 
  Marx understood that these considerations were important.  He was certain that, 
once produced, machines typically undergo dramatic revolutions in reproduction 
values.  He went so far as to insist that new technology destroys capital values so 
rapidly that no factory ever covers its original production costs (Perelman 1987, 
Ch. 4; see Marx to Engels on 14 August 1851, in Marx and Engels 1982, p. 424; Marx 
1967, III, p. 114; and Marx 1963, p. 65; Marx to Engels, 19 November 1869; in Marx 
and Engels 1942, p. 270).  Marx observed: 
  ##The value of machinery, etc., falls ... because it can be reproduced more 
cheaply.  This is one of the reasons why large enterprises frequently do not 
flourish until they pass into other hands, i.e., after their first proprietors have 
been bankrupted, and their successors, who buy them cheaply, therefore begin from 
the outset with a smaller outlay of capital.  [Marx 1967; 3, p. 114] 
  Marx cited Babbage's example of frames for making patent net that initially sold 
for twelve hundred pounds.  They cost only sixty pounds a few years later (Marx 
1977, p. 528; Babbage 1835, p. 286 and 214; see also Baumol and Willig 1981; and 
Gaskell 1833, p. 43; cited in Alberro and Persky 1981).  Babbage claimed, "the 
improvements succeeded each other so rapidly that machines which had never been 
finished were abandoned in the hands of their makers, because new improvements had 
superseded their utility" (Babbage 1835, p. 286). 
  Babbage's rule of thumb was that the cost of an original machine was roughly five 
times the cost of a duplicate (Babbage 1835, p. 266).  According to Babbage's 
estimates, one hour of labor embodied in patent nets that were only a few years old 
would be equivalent to three minutes of direct labor embodied in a new machine. 
  To the extent that Babbage's example was typical, quantitative measurement of 
values would be difficult, if not impossible.  Reproduction costs shift in 
unpredictable patterns.  Because we cannot predict what future technologies will be 
available at any given time in the future, we have no way of knowing in advance how 
long a particular capital good will be used before it will be replaced.  A machine 
that lasts 20 years would presumably transfer value to the output at a different 
rate from a machine that would be expected to last only a single year. 
  Because we cannot see into the future, we can only retrospectively calculate the 
appropriate amount of value transferred from the constant capital.  In other words, 
some time in the future after the equipment used in the production process had been 
used up we could calculate the values of goods produced today.  We cannot calculate 
the values of goods produced today, because knowing the appropriate values of the 
constant capital being transferred today is impossible without advanced knowledge of 
future reproduction values. 
  Alternatively, we could calculate the value of goods based on capitalists' 
estimates of future depreciation patterns.  Once we embark on the path of taking 
subject estimates of future depreciation into consideration, we open a new can of 
  To begin with, we have no way of knowing the capitalists' subjective opinions.  In 
addition, Marx's assertion about bankruptcies suggests that these subjective 
opinions are grossly mistaken. 
  Finally, capitalists are influenced by the relationship between risk and rate of 
profit (or surplus value), introducing a further subjective influence into value 
theory.  Since capitalists might accept a low rate of return for what they perceive 
to be a relatively small risk, measures based on their underlying estimates about 
capital values will somehow have to take the extent of risk into account. 
  Although replacing simple values with reproduction values makes quantitative 
analysis more difficult, I want to demonstrate that the qualitative insights of 
reproduction value theory make Marx's analysis of business cycle theory more 
powerful than any analysis based on simple value theory.  Parenthetically, let me 
mention here that reproduction values can also increase, especially if capitalism 
creates environmental destruction, which makes reproduction more difficult.  Here 
again reproduction value theory offers deeper insights into that relationship 
between the resource base and economic conditions.  I have treated this matter 
elsewhere (Perelman 1987, Chapter 2).  Now I want to concentrate on Marx's analysis 
of how reproduction values change and how, in the short run, the market allows 
prices to deviate from reproduction values. 

I have mentioned this idea several times on the list, but Jerry seems to be the only 
one who expressed any sympathy for it.

On Thu, Feb 07, 2008 at 09:18:25AM -0500, Gerald Levy wrote:
> Hi Paul C and Alejandro A:
> "Depreciation of labour"  may not be the exact phrase used by Marx
> in _Capital_, but there is a discussion of the "revaluation and devaluation 
> of the variable capital" in Volume III, Chapter 6, Section 2.   After
> explaining the release and tying-up of constant capital, he goes on to
> discuss variable capital later on in the section (beginning on p. 209 in 
> the Penguin/Vintage edition).    
> Note the reference to "moral depreciation" earlier in that same page.
> In solidarity, Jerry
> > To be sure one would have to look at the original french and then 
> > compare the usage with what
> > was current in mid 19th Century french literature.
> > By the phrase 'depreciation of labour, I think Marx meant, in those 
> > passages, a decline in the payment
> > to labour or a decline in wages. This is something different from a 
> > depreciation of commodities below
> > their value.
> > It must also be born in mind that this is a relatively early text, and 
> > his economic terminology at
> > this stage is not quite the same as he used later on in Capital.
> _______________________________________________
> ope mailing list

Michael Perelman
Economics Department
California State University
Chico, CA 95929

Tel. 530-898-5321
E-Mail michael at
ope mailing list

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