[OPE-L:1064] Re: Discussions on the labor Theory of Value

riccardo bellofior (bellofio@cisi.unito.it)
Thu, 15 Feb 1996 03:54:17 -0800

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At 13:52 13-02-1996 -0800, Duncan K Foley wrote:
> The labor theory of value is not a very good theory of relative prices, and I
>> don't myself think Marx saw it in that light, as I've said before.

A. May I forward a note on the discussions on the labor theory of
value which is going on since january (but, sure, I've not read every
single post)? I agree almost word by word with the post by Duncan Foley on
the matter. I agree most strongly on the point "that newly produced value
is the form living labor takes in a commodity economy, and that surplus
value (which includes profits, rents interest,and other profit-type income
flows) represents the labor exploited by capitalists through the wage-labor
relation. This newly produced value can be measured or expressed either in
money or in labor time (corrected
where necessary for differences in skill levels.)". Moreover, I agree that
"it makes most sense to view Volume I of Capital as an attempt to work out
the consequences of the labor theory of value at the level of the aggregate
commodity (or, if you prefer, the average commodity). The results are
supposed to hold good whether or not prices are proportional to embodied
labor coefficients (if they exist). For essentially pedagogical reasons
Marx often works through examples on the assumption that prices are
proportional to embodied labor times, but I don't read the text as limiting
the conclusions to that assumption." Finally, I agree that "different
definitions will lead to different concrete measures of value added and
as a result different values of money in the sense of the ratio of living
labor time to value added, but I'm not sure very many important political
economic questions are sensitive to these accounting differences."

B. At the same time, I think that the labor theory of value cannot be
reduced to this (truly important) macro accounting system which stresses
the equality between aggregate living labor and aggregate value added.

C. In Marxian labor theory of value, I think, there was - and rightly
so - the aim to explain how the quantities which form the data from where
relative prices are determined comes to life. While in Ricardo and Sraffa
conditions of production are taken as given, in Marx the formation of
economic magnitudes (the why? quetsion and not only the how much? question)
is the preliminary issue treated *inside* value theory (thorugh Marx's
notion of abstract labor). In Marx this took the shape of a theory of the
*origin* of surplus value. Looked from this angle, the labor theory of
value cannot be constrained neither in an equilibrium approach, either
micro or macro, nor in accounting system: simply because what is at stake
here is how (the tendency to) equilibrium (and, alas, non-equilibrium
accumulation) is produced within the system.

D. Has this something to bear with the issue of value-price equality
in the first volume of Capital? Yes, I submit. My argument - though I admit
a controversial one: but why lists should exist if not to discuss
controversial arguments - is shortly the following. To explain the origin
of profit Marx has logically to start from a counterfactual comparison
between the (capitalistically impossible) situation in which only the
(vertically integrated sector of the) means of susbistence are produced, on
one side, and the real situation in which the output gives way to the
capitalist surplus, on the other side. The first situation is reconstructed
through the force of abstraction from the second one. In the first
situation, which at the beginning works as a benchmark, of course profits
are absent and prices are identical to value. This prices (= values) are
temporary maintained as an assumption when the question of the origin of
surplus value is at stake, to separate the issue from the distribution of
the surplus value. (Marx had to assume some exchange ratio even when
analysing the production of surplus value because the latter is a magnitude
whose existence cannot be divorced from exchange, a point which I do not
wish to pursue now).

E. Thus the (linear) logical sequence is from the *creation* of value
to the rate of profit (in value terms) to the simultaneous determination of
prices and the rate of profits (in price terms). But in terms of relative
prices determination prices and the rate of profit are determined in a
circular way.

F. Another way of putting things is to say that if one wants to
explain capital s/he must starts from the hypothesis that labor power does
consume commodities which are not capitalistically produced, and thus
commodities which must be computed at their values. When commodities are
shown as capitalistically produced comodities, the (same) means of
subsistence must be reevalued in price terms - thus, there is a kind of
double definition of the value of labor power. There must be something in
Grossmann going towards this direction.

G. To see Marx's reasoning at work as I reconstructed it in D look at
Penguin edition, pp. 293-306: The valorization *process*. This process is
at work in any of the capitalist circuits, because it stays 'behind' any
set of relative prices however determined.

H. An aside: if someone is doubting that there is a counterfactual
element in Marx's approach, and that this element is made up by the
reference to a model of circular flow (in the Schumpeterian sense, namely,
zero profits) please look at p. 297, last paragraph: "Our capitalist stares
in astonishment. The value of the product is equal to the value of the
capital advanced. etc.". The second side of the comparison is on p. 301:
"Our capitalist foresaw the situation, and that was the cause of his
laughter, etc.". The difference between the two situations is at first
traced by Marx to the fact that capitalist labor is forced and
otherdirected labor - it is pumped out longer than in the circular flow.
This chapter clearly refers to Marx's critique to Ricardo in TSV where he
objects to Ricardo that the latter took the length and the intensity of the
working day as given. Sraffa's taking the conditions of production as given
is evidently going in Ricardo's footsteps.

I. Thus, in a sense, I agree with Alan on the crucial role of a
non-equilibrium element in Marx's reasoning, though for different reasons.

Some other small points on recent posts:

1. On Sraffa. His conclusions are quite apart from the tradition which
worked on the reproduction schema because he excludes already in the
preface any reference to fixed or variable technological coefficients,
returns to scale, etc. (he is no von Neumann). He is only taking a
photograph of the system at the end of production in the strict sense
('after the harvest', he writes) and before actual exchange; his prices are
simply the prices which would hold under particular hypotheses on the
reintegration of the inputs and the distribution of surplus value, and
there is no reason to suppose they act as centers of gravitation (he was no
Garegnani either). There is no link in Sraffa between the surplus and the
market. Hence, Sraffa's prices are compatible with (i.e. may be developed
from, but cannot be reduced to) two very different outlooks on the economic
system: (i) the *planned* economy where prices guarantee an 'efficient'
working of the system, efficient being interpreted in the sense of the
literature on 'optimal' growth; (ii) the *Marxian* view of the producers'
sovereignty in capitalism, where firms decide the composition of output
irrespective of consumers' preferences. Sraffa says nothing, and wishes to
say nothing, on *capitalist* reproduction. Let me draw a moral from what
precedes: we must have in handling different authors and traditions the
same respect we ask for Marx.

2. In early January Jerry asked some references for understanding the
French unrest in December. I know of two books which I think may help
people understand how French economists are reading French and European
matters, but unfortunately they are in French. The books are:

Michel Aglietta, Macroeconomie monetaire, La Decouverte,Paris 1995

Jean-Paul Fitoussi, Le Debat Interdit. Monnaie, Europe, Pauvrete, Arlea-Le
Seuil, Paris 1995

The second was the economic advisor for Jacques Chirac in his electoral
campaign, which looked more worried of what French calls 'la fracture
social' (growing inequality and unemployment) than the government the same
Chirac put in power. The first is the renowned regulationist theorist, who
stresses the role of global finance in shaping a new post-fordist system -
and who, BTW, supported the EMU. Both Fitoussi and Aglietta would prefer
an European money decided, so to speak, in one night and not in a long
transition process. Almost all the economists, both right and left-wing,
saw the struggles as going against the necessary march of history. The
criticism to the government was on the means rather than on the ends. A
good (but old) critique of the EMU project was raised by Jean Luc Gaffard
on Le Monde Diplomatique some years ago (1992 or 1993). He said that real
convergence was required before the monetary union, and that this real
convergence needed (controlled) budget deficits, industrial policies, and
flexible (autonomous) monetary policies, all things which run against the
Maastricht criteria. Gaffard is an Hicksian with Schumpeterian (and even
Austrian) elements.

3. In the same post Jerry also asked if people had some papers they wished
to have discussed. I have two new things, but I do not think they are
suited for OPE-L. Nevertheless I put here an 'advertisment' because
(especially on the first) I am looking for comments.

- Between Wicksell and Hayek. A New Look at Mises's Theory of Money and Credit

- Sraffa in context

The first may be useful to understand my way of looking at monetary
matters, the second for those interested to new (odd) readings of Sraffa.

4. Jerry also told here of a heated discussion on marxism list about the
'closed' nature of OPE-L. I'm slightly in favour to leave OPE-L closed -
especially having been a masochist participant in marxism for sometime. But
why the archives should not be accessible?

It started as a 'short' letter. Sorry for the unintended dimension it took.


Riccardo Bellofiore e-mail: bellofio@cisi.unito.it
Department of Economics Tel: (39) -35- 277505 (direct)
University of Bergamo (39) -35- 277501 (dept.)
Piazza Rosate, 2 (39) -11- 5819619 (home)
I-24129 Bergamo Fax: (39) -35- 249975