[OPE-L:905] Re: Valuation of Inputs (Andrew)

akliman@acl.nyit.edu (akliman@acl.nyit.edu)
Wed, 31 Jan 1996 16:23:04 -0800

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Andrew here, replying to John Ernst's and Michael Perelman's comments on
my post about different concepts of reproduction costs, etc.

John asks which cost measure the capitalists' use in profitability calcula-
tions. I'm not entirely sure, but I doubt they use pre-production
reproduction costs. They do use both historical and replacement costs.
Still, the issue I was addressing was the determination of value. In
Marx's theory, the value of the commodity is the value transferred from
used-up constant capital, plus value added through extraction of living
labor. The value of the constant capital here is definitely not its
historical cost--this is why the capitalists' speed-up production, so
much, due to the fear and reality of moral depreciation; they cannot
recoup the whole value of their outlay if the value of the machinery, etc.
falls. On the other hand, the value of the constant capital transferred
cannot be its replacement cost, because Marx says that it enters into the
value of the product as a *determining factor* (TSV I, p. 109), whereas
the replacement cost interpretation would make the value of the constant
capital simultaneously determined with the value of the output--AND THUS
to recognize that Marx's theory holds that commodities' values are determined
in production, before exchange of outputs--he loathed the notion that they
are determined by demand for the products. They must, to be consistent
with his theory, then, be determined without respect to output prices, and
before output prices.

The only way to make sense of this, together with the notion that the value
of a commodity is its reproduction cost, is that the value of the constant
capital that is relevant to the determination of output value is the pre-
production reproduction cost.

John asks two other questions to which I don't know the answer. I'm not
sure how they relate to what I was saying, since they talk about capitalists'
accounting, expectations, pricing, not value determination per se.

On monopoly--yes, I realize that John and Fred weren't focusing on monopoly
being a factor that keeps the price level from falling. They both seemed
to presume this, however, mentioning it as an "aside." I was just questioning
the premise. Michael Perelman says my comments were "partially correct."
In what way were they incorrect--I'm no expert here, I'm asking, not
challenging. Relatedly, Michael, do you think Keynesian demand management
could have pumped up demand, and/or kept the price level from falling, if
we had still been on the gold standard?

Andrew Kliman