[OPE] Valuations, the Austrians and Kantorovich reply to Alejandro

From: Jurriaan Bendien (adsl675281@tiscali.nl)
Date: Tue Feb 26 2008 - 13:57:44 EST

Marx never prepared his theory of production prices for publication. My own contribution to this topic, as I have previously stated, is that: 

(1) Marx's production prices DIFFER substantially from the "natural prices" of Smith and Ricardo, among other things because the Marxian production prices do not necessarily "gravitate" to labour values at all, as Marx explicitly mentions for example in his discussion of ground rent. 

(2) Marx's production prices may be understood as theoretical prices, empirical price averages, or regulating prices, three very different different notions which do not necessarily mean the same thing at all. 

The Marxists and neo-Ricardians took production prices to be a self-evident, obvious notion which was essentially THE SAME for Smith, Ricardo and Marx (as Fred Moseley argues too, with references to "Marx's method"), but in reality this is not the case at all, and that can be proved very definitely with chapter & verse, and by understanding the logical implications of the concepts. 

Consequently, the "determinism" of production prices (including the realities of market-functioning) has never been satisfactorily presented in the economic literature on the subject. As a corollary, the influence of the law of value on the specifically capitalist method of producing and distributing new output has never been satisfactorily presented either (admittedly, even a crude interpretation of production prices already makes better sense of the economy than the neoclassical economics of production can). 

Anwar Shaikh, Makoto Itoh, Thomas Sekine etc. clearly take the view that production prices are strictly "theoretical prices", which do not exist in reality in any way. This implies that production prices only describe "essential relationships" in a theoretical model, which is remote from actual prices and actual economic relationships. But not only does this raise the question of how "theoretical prices" can in any way determine actual prices, it also overlooks the three very different interpretations I mention, and it overlooks that Marx, at least, evidently thought that production prices were a real regulating force in a real capitalist economy, and not simply a theoretical construct (in the Sekine interpretation, of course, this is no problem, because his dialectic of capital which "improves" on Marx has nothing whatsoever to do with empirical reality).

Anwar Shaikh invents a concept of "regulating prices" which is distinct from production prices, but this actually means saving the theory by denying its applicability to any observable reality. A Lakatosian would call it a defense of the "hard core" of a research programme by means of an "ad hoc" strategem in the "protective belt". The question that this raises is, "what good is a theory, if it cannot explain anything about the content of observable reality"?

The way out of these conundrums, I personally think, is NOT to take the concept of production prices for granted, as Marxists do, but rather to problematize this concept, to recognize that it is NOT an obvious notion (contrary to Fred Moseley's literalism etc.). This involves specifying a theory which explains how it is possible that (in what sense) production prices could refer to both theoretical prices, empirical price averages and regulating prices AT THE SAME TIME. And I think that in turn this necessarily involves recognizing different TYPES of production prices, and recognizing the realities of the price system. In Marxist theory, there is only one type of production price, defined by orthodox definition. But any serious analysis must recognize there are different types, I think (broadly, I have distinguished enterprise production prices, sectoral production prices, and final production prices).

So, in summary, I think Alejandro has a valid point, but it is valid only because it is an area which remained undertheorized by Marxists and neo-Ricardians, who pretended that a problematic notion was an self-evident notion. Once we accept that Marx simply did not fully elaborate or solve the problem of production prices, the road is open for new theorizing which tackles the problem he tried to solve in a rigorous, conscientious way. 


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