[OPE-L:505] Value of Constant Capital

John R. Ernst (ernst@pipeline.com)
Fri, 17 Nov 1995 15:44:30 -0800

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John said

I think we're in trouble with an LTV that simply assumes price
changes because of increases in productivity. Granted, these
days, we do see them in the computer industry. But, even if
we assume that the price of a machine drops dramatically, do
the producers using that machine drop their prices? Do they
then compute their rates of profit based on this new price of
the machine? Something is amiss here. Suggestions? Why
are we not using Marx's concepts of individual and social

Paul C said
Why are we in trouble with an LTV that assumes price changes
because of increases in productivity?
Is this not what Marx assumes when dealing with relative
surplus value?
On the second question of the extent to which producers
who use a cheapened product pass this on in their prices,
I would say that in principle yes, but whether it is noticeable
will depend upon how important the input is to their product.
If we take a product like PCMCIA solid state disks, which depend
for a large part of their cost on flash memory chips, we can
be pretty certain that they will pass it on. If we take a product
like flour, which may use a few computers in the mills, then
the decline in flour prices would probably not be noticeable.

On the recomputing of rates of profit, the cases where it becomes
significant are where the rapidly depreciating machine makes
up a large part of a firms assets. Mainframe leasing companies,
will have had to take into account technical depreciation of
this sort.

John responds:

1. Marx does indeed assume a price decrease as the production
of relative surplus value takes place. But, for him,
there are some qualifications:

In presenting us with an example of the innovating
capitalist, Marx states:

"It is not our intention to consider, here, the way in which
the laws, immanent in capitalist production, manifest them-
selves in the movements of individual masses of capital,
where they assert themselves as coercive laws of competition,
and are brought home to the mind of the individual capitalist
as the directing motives of his operation."
(Bk I, p318, Int Ed.)

In part, what I am saying is that for us to simply assert that
price reductions take place assumes that the immanent laws
to which Marx refers are either obvious or, at least,
available for review somewhere. They are not obvious; where
are they?

2. Must we ignore the distinction between individual value and
social value? For Marx, the "real value of a commodity is,
however, not its individual value but its social value..."
He goes on to state that "the real value is not measured by
the labour-time that the article in each individual case
costs the producer, but by the labour-time socially
necessary for its production. (Bk I, p 317, Int. Ed.)
How are we then to look at the labor time that creates
value? That is, to what extent do we allow for commodities
to be produced by what Marx calls "exceptionally productive
labour" which operates as intensified labour since "it
creates in equal periods of time greater values than the
average social labour of the same kind. (Bk I, p318, Int.Ed)

3. At some point, this discussion connects with that of
abstract labor since the amount of value added by a given
quantity of abstract labor is determined to some extent
by the degree to which that quantity of abstract labor
is "exceptional."

4. When capitalist buy the fixed capital, do they not use
the idea of "moral depreciation" in pricing their outputs?
Would this not mean that the value advanced as fixed capital
is recovered despite the cheapening of the elements of
fixed capital? Granted the example I gave was initially
one in which the price change was dramatic but for those
capitalist using computers whose prices are always dropping,
it would seem that the capitalist must shorten the life
expectancy of the computer in question and not revalue
the his capital as the price of computers falls.

5. How is the recovery of the value of fixed capital affected
by inflation? Here, I mean not the usual way of looking
at inflation but the idea that the value of money is
falling in that it represents less labor time over time
because of increases in productivity that lead to relative
price decreases.