[OPE-L:1324] Re: A Problem w. Transformation

John R. Ernst (ernst@pipeline.com)
Tue, 5 Mar 1996 10:23:57 -0800

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To catch the dialog, see below.

On Tue, 5 Mar 1996 Duncan K Foley <dkf2@columbia.edu> said:

>On Mon, 4 Mar 1996, John R. Ernst wrote:
>> Among the numerious problems I have in understanding
>> the transformation problem is the inclusion of all sectors
>> as one transforms values into prices of production. In
>> a letter to Engels, dated 4/30/1868, Marx states
>> "Those branches of production which constitute natural
>> MONOPOLIES are excluded from this equalization process
>> even if their rate of profit is higher than the social rate. This
>> is important for the development of land rent."
>> (Emphasis is Marx's)
>> Given that Marx, unlike many of his followers, recognized that
>> land was privately owned and hence rent could be either
>> absolute or differential or both, the usual manner of carrying out the

>> transformation procedure seems suspect in that it includes all
>> sectors. That is, to derive prices of production from values
>> one assumes a uniform rate of profit in all sectors even though
>> all sectors are not earning that same rate of profit.
>This raises a real, but, I think, answerable question. The issue is the
>theory of competition. You could find profit-rate equalizing prices on
>the hypothesis that capitalists equalized profit after rent payments
>(which would be consistent with Marx's occasional remarks including rent
>as part of the constant capital from the point of view of the individual
>capitalist). Land prices then capitalize the rent streams.


I think your "solution" still forces another assumption upon us.
Specifically, if gold producers capture absolute as well as
differential rent, we still would not know how much absolute rent
is involved. That is, absolute rent seems to be determined, in part,
by demand unless we assume that the marginal producer "sells"
gold at its value and has a lower composition of capital than