Re: [OPE] devaluation and revaluation of variable capital

From: Paul Cockshott (
Date: Fri Feb 08 2008 - 10:32:23 EST

Perhaps I should not be replying for Ian, but I dont think that these 
points necessarily weaken
his work. His concept of equilibrium is of a thermodymamic equilibrium 
with a stable
dispersion of prices around values. He does not imagine that all 
transactions take place
at value, instead the price of each transaction is a random variable 
whose expected value
is given as a linear function of labour content. Thus in Ians model 
uncertainty is built
in from the start.

Alejandro Agafonow wrote:
> Excellent thought Perelman! Your ideas deserve more attention from 
> Austrian economics camp and contemporary market socialism as well.
> The idea of rivalry investment projects based on expected labour 
> returns and the technology involved, was an issue discussed by USSR 
> economists (Strumilin and Kantorovich among others), even though 
> according to this scholars this returns would be calculated based on 
> strictly objectives criteria using lineal programming techniques for 
> differentiating between rivals investment projects. I think Paul 
> Cockshott in this forum has discussed something like this based on 
> Kantorovich.
> Even though this new can of worms would let LVT better understand 
> capitalism’s dynamic phenomena, since replaces a structured problem 
> able to be optimized (simple value) for another unstructured where 
> uncertainty intervenes (reproduction value), if I were Marxist I were 
> not so optimist like you and Charlie.
> I think that your analysis, that I consider right, opens a “second can 
> of worms” or Pandora’s box for LTV classical statement and for 
> transformation problem. Concerning the last one, since the pattern of 
> investment is unpredictable and so the cost structure that an economy 
> is going to have in the future, What justifies that Marxists calculate 
> in retrospective (a posteriori) the amount of labour transferred by 
> constant capital to conclude contrivedly that prices and values match?
> Concerning LTV classical statement, once we accept “reproduction value 
> perspective” instead simple value, falls down the idea of labour as a 
> gravitational centre around which spin prices. In fact, prices would 
> be the gravitational centre around which spin values –as I argued in 
> my previous two messages.
> Nevertheless, I think that a labour accounting economy as that 
> proposed by Cockshott and Cottrell is not fruitless, just that 
> requires a philosophical justification for the use of labour as 
> accounting unit instead of classical justification that they both 
> choose stating that labour is the objective source of value. In fact, 
> it is not wild to think in a labour accounting economy based in a 
> subjective theory of value!!!
> Perelmen, may I cite your post?
> Yours sincerely,
> Alejandro Agafonow
> ----- Mensaje original ----
> De: Michael Perelman <>
> Para: Outline on Political Economy mailing list <>
> Enviado: viernes, 8 de febrero, 2008 3:52:29
> Asunto: Re: [OPE] devaluation and revaluation of variable capital
> 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
> worms.
> 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
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> <>
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