[OPE-L:828] Revaluation of inputs

Alan Freeman (100042.617@compuserve.com)
Mon, 22 Jan 1996 04:20:27 -0800

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In his posting OPE:805 on 19th January, Fred has done a great
service by finally collecting all the quotations used to
justify simultaneous valuation in once place, where we can
deal with them at one go and understand the common thread
of the problem which has to be confronted.

I think Fred's post is also clear empirical evidence that
Simon is in error when he writes [OPE 804]: "I don't think
anyone would disagree with this[Alan's proposals 1 and 2 from
OPE 801]"

Let us consider the words cited by Fred from Volume I:

"If the amount of labour-time socially necessary for the
production of any commodity alters - and a given weight of
cotton represents more labour after a bad harvest than after
a good one - this reacts back on all the old commodities of
the same type, because they are only individuals of the same

There are two questions. The first is very simple: how can
the rise in the price of the cotton at the end of the harvest
react back on cotton stocks which no longer exist? This, Marx
never claims. In the cited passage he is quite clear that
it reacts back on existing stocks: on cotton which has not
yet been worked up. The cotton which has already been consumed
in the production of finished goods has already been consumed
by the end of the harvest in question. How can something
which has already been consumed be revalued? And how far
back in time does this miraculous process extend?

But there is a more important question in my view: when there
*are* pre-existing stocks, produced with different techniques,
*how* does a change in current production conditions react back?
This is the nub of the matter. This question to my knowledge has
never been even asked in the simultaneous framework, let alone
solved. This is because, in the simultaneous framework, there
is no variable to represent stocks. Insofar as the 'joint
production' method of von Neumann and Sraffa approaches the
problem it does so by the illegitimate method of considering
different vintages of the same commodity to be different
commodities, that is, they deny precisely what Marx says, that
these are 'old commodities of the same type'

To illustrate the problem in its clearest form let us consider
the issue discussed (and solved differently than by Fred) in
Chapter 6 of Capital Volume III, where Marx assesses the impact
of price changes on stocks of raw materials.

Consider an economy which produces corn using corn and labour.

Suppose that this society, being prudent, sets aside a certain
amount of corn each year as a buffer stock, and uses a certain
amount of corn each year to produce more corn, to live on.

To put some numbers to this, suppose that at the beginning of
year 1 this society has 20 tons of corn.

Suppose it sets aside 5 tons, plants 5 gives 5 to the workers
and 5 to the capitalists.

Suppose this first year is a good one, and with the application
of 100 person-years of labour 15 tons are produced.

Production of corn then satisfies the following equations, if we use
v to represent the value of corn and keep to the simultaneous

5v + 100 = 15v

The value of corn is thus 10 years per ton. The total value in society
is now equal to

5 tons of pre-period 1 stocks worth 10 years each= 50 years
15 tons of current production worth 10 years each= 150 years
Total 20 tons of corn worth 10 years each = 200 years

Now suppose period 2 starts exactly like period 1. 5 tons are set aside,
5 given to the capitalists, 5 to the workers, and 5 are planted.

But this year, production conditions worsen. 100 person-years produce only
10 tons.

Production of corn then satisfies the following equations:

5v + 100 = 10v

The value of corn is now 20 years per ton, according to the simultaneous
method. The total value in society is now equal to

5 tons of pre-period 1 stocks worth 20 years each= 100 years
10 tons of current production worth 20 years each= 200 years
Total 15 tons of corn worth 20 years each = 300 years

Society began the year with corn worth 200 years = 200 C + buffer stocks
It added 100 years of live labour = 100 new S+V created by labour
It consumed 10 tons of corn worth 200 years =-200 consumed S+V

The total value either preserved as stocks, transferred to
the product as C, or created by live labour, is thus

200 + 100 - 200 = 100 years

(you may value the consumed wages and profits at 100 if you wish;
this does not alter the problem)

Thus, by revaluing the existing stocks to the value of 20 years per ton,
at least 200 extra years of value have been created. But as Marx clearly
explains, new value can only be created by living labour. 100 years
of living labour have created 300 years of new value.

1) Where did the extra value come from?

2) How is it that a worse harvest, that is, a harvest in which people
produced less goods, has increased the value in society's possession by

3) If the harvest had been so bad that only 5 tons were produced (as happens:
that's why society laid up stocks), the value of a ton of corn would be infinite.
But society would weather this storm in physical terms without difficulty,
because it would draw on the laid-up buffer stocks.

How can this be?
This is also a question for the fundamental marxian theorem which assumes
a physical surplus of all goods, a condition which is almost never attained.

4) If the harvest had been even worse and produced only 4.99999 tons, the value of
a ton would be negative and the entire stock of society has an enormous negative
value. As before, society would survive using the buffer stocks.

How can this be?