[OPE-L:461] When exactly is a good priced? [Alan]

glevy@acnet.pratt.edu (glevy@acnet.pratt.edu)
Thu, 9 Nov 1995 16:46:23 -0800

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Date: 09 Nov 95 09:05:00 EST
From: Alan Freeman <100042.617@compuserve.com>
To: "INTERNET:glevy@acnet.pratt.edu" <glevy@acnet.pratt.edu>
Subject: [OPE-L:447] Re: #446 & # 445

I'm out of the picture till about November 23 but I will catch up then.

I hope people follow up on Jerry's question cited below which I think is
important and useful. *When* exactly is a good priced? and *When* does
the value transfer that results from this repricing take place?

My argument is not that the offer price is necessarily the realised price,
although the difference is an important one. My argument is that
the transfer of value takes place as soon as the price is set, and that
this *same* transfer applies to all goods of the same type whether or
not they are sold. Value transfers are thus independent of the volume
of trade. That's the essential point.

Thus once the
price is fixed, by whatever means - for example, if even one good
trades at that price - then *all* similar commodities take on that
price whether or not they are sold. Thus when the automobile maker
'discovers' that the real price of a car is $20,000 and not $25,000
(more accurately when the world discovers it) at that moment her/his
entire stock of cars is repriced at that rate. S/he can't say to the
accountants 'well, I let that one go for $20,000 but really they're
still worth $25,000'. The question is thus whether a price is uniform,
not whether it is realistic.

The second point, which follows from the first, is that transfers of
value are effected not by trade but by price movements. Once the
price of a car falls, the price of all cars fall. Ditto if it rises. This is
so regardless of whether the car actually sells. Transfers of value
are therefore *not* a function of the volume of trade. They are a pure
function of price changes.

Of course if, between one period and another, the price which was
once low rises again, then this modifies the transfer; this is not however
because it makes the first transfer cease to be, but because it gives back
which was once taken away. If on Monday I have goods worth $10, and
on Tuesday the price rises to $12, and on Wednesday it sinks again
to $9, then the 'correct' story is that I made $2 on Tuesday and lost
$3 on Wednesday, not that I never 'really' gained the money on Tuesday.

This is certainly how all the money markets function. A trader's position is
what s/he is worth at a given moment in time, not what s/he thinks s/he
might be able to get for it tomorrow. Otherwise Nick Leeson would still
be running Baring's bank.

I think this is a very important point,because it relates to a vital debate
on what is really meant by the 'replacement cost' of constant capital -
which, needless to say, is of critical importance in relation to the
transformation problem. Perhaps Fred would like to take this up.

One further point: I tend to think given the volume of discussion on
abstract labour that we should invite in Bruce Roberts and Massimo
di Angelis. Please excuse me if they are already on; I don't always have
time to go back and check. Both have contributed papers to the
forthcoming mini-conference on value on the subject of abstract labour
and in Bruce's case it is the second such paper; he is exploring the
issue in some depth and though I am not convinced by the line he
is taking I think he is a vital part of this discussion.

Jerry Levy:[OPE-L:447] Re: #446 & # 445

"Are commodities priced before they are traded? This is a question that
must be answered not only in the particular context that it arises in
Marx, but also in the more concrete context in which commodities are, in
fact, currently priced under contemporary capitalism.

In oligopolistic markets commodities are "priced" ex ante. However,
the ex ante price can not become the real price until it is validated by
exchange ex post. In other words, firms can make projections regarding
price, but they can not know ex ante what the price *will* be for the
commodities that they sell. Latent within any exchange is the
possibility that the price that has been projected will not be realized
in the manner anticipated." (continues: see the post itself)

Alan Freeman