[OPE-L:1181] Re: does price affect value

akliman@acl.nyit.edu (akliman@acl.nyit.edu)
Wed, 21 Feb 1996 14:15:28 -0800

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Andrew here, replying to Duncan's post (ope-l 1135).

First I wish to thank Duncan for taking the time to read the papers, and
moreover, to think the issues through thoroughly enough to give a very
thoughtful and enlightening reply. Even in the few places in which I
do not entirely concur with his views, I think he has expressed the
central issues of the moment with respect to the Ch. 9 transformation in
a precise and clear manner. That's a job in itself.

On to substance:

First, I definintely agree with Duncan that there is a close similarity
between the TSS understanding of the relation between money and labor-time
sums and the understanding proposed by Gerard Dumenil and himself
(independently) in the early 1980s. I also think that Anwar Shaikh's notion
of the transformation being between "direct prices" and production prices
likewise bears a family resemblance. So I think Duncan's point is well-
taken: the similarity should be acknowledged and emphasized, particularly
since this will help students sort matters out. Ted McGlone and I haven't
finished the revision of the paper upon which Duncan has commented; the
similarity will be noted in the revised version.

However, whereas Duncan suggests that the two understandings are identical--
at least that of Kliman and McGlone and that of himself and Dumenil, for I
can't speak for other TSS proponents on this issue--I should note that
I'm not sure how helpful it is to call the ratio of living labor to money
value-added the value of money. More importantly, our money/labor-time
equivalence factor (value of money, monetary expression of value, money
equivalent of a labor-hour--a lot of terms are being used nowadays to
refer to the same thing) is defined slightly differently, being based on
the ratio of total money value (= price) to total labor-time value
(= price). This too is a minor matter in itself, though the difference
may reflect a number of differences concerning the importance of dead
labor in Marx's theory vs. the importance of determination of income
and relative shares.

Duncan then goes on to note that, in addition to the TSS interpretation
obtaining the equalities of Marx's transformation (including total
value = total price and s/(c+v) as the proft rate) in a logically consistent
manner, it also makes the static "values" of the standard interpretation
into a special case of a more general theory. Interestingly, Duncan
noticed this although we didn't even mention this in the paper; to my
knowledge, only Alan Freeman's work has previously called attention to
this fact.

Duncan then says that the issue of "simultaneism" is misleading because
our interpretation "could be applied whether prices are stationary or
not." I certainly agree that this is the case. Indeed, there are a
number of folks (Wolff/Callari/Roberts, Chai-on Lee, Ramos & Rodriguez)
who have a similar conception of the value of constant capital as
differing from the value of means of production (or labor-time needed
to reproduce the means of production, etc.--there are interpretative
differences here), and I should also mention Fred Moseley's work in
this regard, who obtain all the same transformation equalities on the
basis of simultaneously determined prices.

To advance the discussion, I've thus been trying to de-emphasize the
issue of obtaining equalities. So let me turn to a few differences
between their intepretations and ours that I think are important.
First, temporal determination makes clear that the value of constant
capital isn't simply being *defined* as the price (and not value) of
the means of production, whereas this can appear as a tautology in the
simultaneous single-system (SSS) interpretation. Because total value
= total price, then the price of e.g., machines that become means of
production in the next period are clearly sums of value, quanta of
labor-time, and an equivalent constant capital-value is laid out for
them. Put somewhat differently, the TSS interpretation *shows how*
input prices are "transformed" without violating the conception that
value is determined by labor-time. In the SSS interpretation, this is
not at all clear--one could simply interpret the input prices as being
values because "the market" declares them to be values.

Secondly, though it may seem to be a formal and trivial matter, the TSS
interpretation obtains the equalities without a normalization condition
or invariance postulate. In constrast, what the SSS interpretation
does is to *first* obtain the profit rate on the basis of a Sraffa
system, and then to equate s/(c+v) to the profit rate. I.e., the
degree of freedom in the Sraffa system is used to set the labor-time
"price" of the "numeriare" such that s/(c+v) will equal the pre-
determined profit rate. The TSS interpretation uses s/(c+v) as
determined on the basis of capital outlays and the labor extracted in
production to determine the level and distribution of output prices.

Thirdly, and to my mind far most importantly, all this implies that the
real *relations of determination* are rather different in the temporal
and simultaneous interpretations. The SSS interpretation comes to the
peculiar conclusion that the profit rate *equals* s/(c+v), but its level
and tendency are *determined* by technology and the real wage! In the
TSS interpretation, conversely, the profit rate will generally not
equal the "Sraffian" profit rate. Thus, even when the latter must rise
--under Okishio theorem conditions--Marx's profit rate can definitely
fall. So the TSS interpretation moves the question of the Ch. 9
transformation from one of definitional formalism and accounting to
the real relations of profitability, crisis, capital's law of motion, in
which Marx was principally interested. (Other differences from the SSS
interpretation: nonbasics can affect the profit rate, as Marx held, and
the distribution of profit does not affect the profit rate, again as
Marx held.)

Duncan then suggests that whether our conception of constant and varaible
capital is consistent with Marx is unlikely to be satisfactorily resolved.
I certainly agree that if one takes passages from Marx as discrete bits
of evidence and contrasts one against the other, no resolution is likely.
But I think that if people begin to accept that you need to look at the
ability of an interpretation to make sense of the whole--as a whole--
including by replicating the theoretical conclusions of the original
text, and to recognize that the concept of "cost price" is only
"officially" modified begining with Ch. 9 because that's the point where
price deviations from values are first treatedc explicitly, then I think
some real progress can be made.

Duncan then suggests that Marx might not have been aware of all the
complications in constant capital valuation, and that Ch. 9 was only
a draft, etc. First, I don't think this is all that likely, given
the tremendous importance Marx gave to the transformation. He considered
all the remainder of Vol. III to be a development of this transformation,
and he saw the inability to resolve the transformation as the key
to the disintegration of the Ricardian school. Of course, this doesn't
mean that Marx's concept of constant capital valuation is "right," if
that term means anything at all in this context. But I think it is
quite unlikely that Marx had doubts that he had indeed shown the
conformity of real-world profits and prices with the law of value.

Finally, Duncan writes, in what I think is the MOST SIGNIFICANT point
of agreement between us, and the key issue the full implications of
which have yet to be worked out:

"Where the "traditional" (Bortkiewicz, Seton, Morishima, Roemer) interpre-
tation gets off the track, it seems to me, is in maintaining the embodied
labor coefficient interpretation of "value" and as a result throwing out
a good deal of Marx's political economic analysis."

As the author of the jigsaw puzzle parable, I couldn't agree more!

(My only quibble is a terminological one: Marx certainly had an "embodied
labor" concept of value. He also had an "abstract labor" concept of
value. The literature of the 1970s, especially, began to separate them
because the ostensible strength of the "Sraffian" critique forced many
would-be "defenders" of Marx's theory into abandoning quantitative value
theory, at least Marx's. So I think the main thing now is to better
comprehend the meaning of "embodied labor" in *Marx's* sense, not the
sense of Morishima et al.)

The struggle continues.

Andrew Kliman