[OPE-L:546] Re: Value of Constant Capital

akliman@acl.nyit.edu (akliman@acl.nyit.edu)
Wed, 22 Nov 1995 13:21:00 -0800

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Thanks to John Ernst for his thoughts on the questions I (Andrew) raised.

Just a few very brief responses. John follows Grossmann/Mattick in seeing the
lack of surplus-value as not just a cause of crisis, but a proximate cause or
mechanism of crisis. One problem with this view is that the Grossmann
breakdown model seems to be about insufficient surplus-value, but it is really
about insufficient *physical* production to meet the demands of accumulation.
I worked this out algebraically a few years ago on the basis of G's model.
He doesn't tell us the underlying physical relations, but, since it is a
circulating capital model, I used

V(t+1) = V(t)a + l,

where V is unit value, a is means of production per unit output, and l is
living labor per unit output (one can infer l from variable capital, since
G gives us the latter and assumes constant s/v). It turns out that the
only thing underlying the lack of surplus-value IN THAT MODEL is the fact
that the capitalists insist on investing more than is there. Why don't
prices and interest rates rise to soak up the excess demand (John has
informed me that Mattick also made this criticism of G's model)? I stress
"IN THIS MODEL," since I do think the lack of surplus-value matters.

But this brings me to my next point--what IS that surplus-value. In the
aggregate, in money terms, it is total price minus total costs; in labor-time
terms, it is the same thing, except insofar as the monetary expression of
value changes. So either (a) a lack of surplus-value implies that prices
minus costs, and thus prices themselves, are constrained by total value
and surplus-value produced, or (b) there is a non-price mechanism that implies
that a violation of the contraint of prices by values itself has consequences.
So I think we're back to the questions I posed. Essence must appear, and
"lack of surplus-value" doesn't answer the question at the level of
appearance, which is the level at which the Ernst/Cockshott discussion was

I agree that we can't put all the emphasis on falling prices, especially
because capitalism is in serious crisis without falling prices, so if
we want to understand the lick between the FRP and crisis, we need to
look at other things. I fully agree with John's interpretation that
Marx said that prices fall in crisis, not because of the gold standard
as such. I didn't mean to imply the opposite. My point was rather that
now that we are off the gold standard, the tendency for prices to fall in
crisis is overridden, counteracted--so that generally only the rate of
inflation slows in recession; even that's not always true, as witness the
stagflation of the 1970s.

One more thing on prices. In _Capital_ III, Ch. 15, Marx notes that given
price relationships are presumed in the reproduction process, so that
a disturbance of these relations (through falling prices) is a mechanism that
disrupts repayment of debt, reproduction, etc. I presume that in a rational
expectations model, one could say along with John that the capitalists
price in such a way as to anticipate the falling prices but still cover
the devaluation of capital by depreciating it into price--but something
has got to give, since price = materials costs + wages + depreciation +
profit. Upping depreciation costs tends to up price. If prices are falling,
and depreciation is rising, what will give? Profits? If so, and if
expectations are rational, then it seems that the answer to this one is
the superprofits gotten through the difference between individual and
social value.

I'll be back on the net Monday. Ciao--Andrew