[OPE-L:795] Re: More Digression

John R. Ernst (ernst@pipeline.com)
Tue, 16 Jan 1996 20:39:09 -0800

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Thanks for your response. (OPE-792) Let me comment on your
last point first.

Duncan says:

Most of the discussion about the transformation problem takes place at a
pretty abstract level, where the main concern is about the consistency of
certain theoretical frameworks and interpretations. I assume that people
tend to argue these issues through on the assumption of an economy
without technical change and in long-run equilibrium because that is the
simplest case analytically, and the theoretical issues are all present
there without the need to grapple with the complexity of more realistic
models. In fact, I think it is a sound methodological procedure to
require someone to explain their interpretation, say, of the labor theory
of value in this context before one can understand how it might apply to
more complex, and more realistic, cases.

John says:

I had not intended to move to any discussion of the transformation
problem per se but as you indicate out we seem to be approaching it.
You are right that it appears sound to start with a simple case first
and then move to the complex. I suppose my point is that in dealing
with this "simple" case as we turn to the more complex we often
find ourselves in disagreement with Marx. To be sure, he may
be wrong but I think it is worth making sure we are right. Let
me explain.

If in a model using simultaneous valuation, with the usual assumptions,
I compute the value of the constant capital to be, say, 1000, and
proceed to calculate a set of relative prices using those values,
redundant or otherwise, there are many concepts that can be dealt
with in this simple type of model. Once that exercise is finished,
how do we deal with technical change? That is, if due to increases
in productivity the value of the constant capital falls to 500 in the
next period using the same procedures, how do we capture that loss
in value? Is that loss to be used immediately in computing relative

Again, I come back to my questions concerning capital loss
as well as moral depreciation and note your comments concerning
each. Yes, capital is devalued with technical change, but how
do we capture that loss using models that assume equilibrium?
Can we incorporate within those models "moral depreciation",
which, as you remark, seems to be part of capitalists' pricing
strategies, albeit in crude form?


A Point of clarification:

Your lack of understanding of my "conscious effort to
prevent nominal price decreases" is understandable. I
was trying to indicate a difference between the economy
today and that of Marx's time. That is, for Marx, it
seemed reasonable to assume that as a capitalist innovates
he would voluntarily reduce the price. Competition would
then force the price down so that the individual value and
social value correspond. Today we see little of that save
perhaps, as you note, in the computer industry. But, perhaps
more important is the conscious effort of those attempting
to "control" the economy via fiscal and monetary policies
to prevent drastic price decreases.