[OPE-L:1565] Temporality and money

Alan Freeman (100042.617@compuserve.com)
Tue, 26 Mar 1996 19:02:25 -0800

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This post asks two questions which suggest a different angle on
temporality but, I think, go to the heart of Marx's project. In
deference, I'll do them with letters.

Suppose the capitalists advance $K of which $C are spent on means
of production used this period, and $V on wages. Suppose the total
product sells for $C'

$C' > $C + $V.

Define $S (as usual) to be

$S = $C' - $C - $V

First question

What is the size of $K, the capitalists' capital, after replacing
used-up $C and $V, and spending the surplus?

My answer

Capitalists accumulate. They invest at least part of $S on additional
means of production and wages. Call this invested sum $I.

$I > 0 by the definition of capitalism. (1)

Of the original $K, $C + $V have been spent and the goods on which
they were spent have been used. Let $K* stand for the total money
price of all stock except output, immediately prior to sales.

Then $K* = $K - $C - $V (2)

Out of the proceeds of sales $C', the capitalist spends:

$C to replace used material
$V to rehire the workers
$I, the difference between $S and capitalist consumption.
Total $C + $V + $I

Hence the new capital stock $K' is given by

$K' = $K* + $C + $V + $I
= $K + $I. (3)

But by the definition of capitalism, $I > 0

Therefore $K' > $K (4)

Therefore, capital stock grows indefinitely as long as capitalist
accumulation continues, that is, as long as the capitalists do not
consume the whole of their profits. Therefore the rate of profit
must fall if $S does not rise.

Question 2

What, if anything, is wrong with this argument?

Note 1: The last chapter of 'Marx and Non-Equilibrium Economics'
gives a rigorous value-theoretic proof of the above. Naive and
simple though the argument may be, it squares with a valid
interpretation of Marx's value theory.

Note 2: Some may argue that the above is true for money prices,
but not for values. Then values thus interpreted predict reality
worse than the interpretation of Note 1. On empirical grounds,
the 'naive' interpretation is better. On normal scientific grounds,
it is the alternative, more complicated and less realistic definition
of value which has become standard, that requires justification.

Note 3: The argument used no complex math, no eigenvalues, no
matrices, no Perron-Frobenius and indeed no physical quantities.
It meets William of Ockham's well-known criterion: it is simplest,
and it suffices.

Note 4: The argument does not conflict with Marx's value-price
distinction. Each individual capitalist may realise individual
profits higher or lower than surplus value; but the sum of prices
equals the sum of values, and the sum of profits equals the sum of
surplus values, so the result is unaffected by these differences.

Note 5: A conflict arises *only* if Marx's 'two equalities' are
false. If a nondualist argument in favour of these two equalities is
accepted - whether sequential or not - then the above argument is
almost a trivial corollary. Why not accept it?

Note 6: The above argument corresponds exactly to Marx's line of
enquiry. This begins with money. He notes that capitalism comes into
being when money purchases a value-creating agency, namely labour-
power (the conversion of money into capital). He then notes that
this gives rise to a money surplus (check it out) and concludes that
capitalism is self-expanding value. Hence *money* accumulation is
the sine qua non, the Moses and Prophets, of capitalism. This
constitutes the conversion of *surplus-value* into capital: $I (as
defined above) is added to the capital stock at each stage.

Note 7: Can the capital stock ever shrink? Yes: if the capitalists
spend more than their profits, that is, cease temporarily to be
capitalists. Do they ever do this? Yes, in a crisis. Crisis, an
'enforced resolution of contradiction' restores profitability by
interrupting money accumulation. That is, the rate of profit rises
(outside of increased exploitation) only through the temporary
negation of capitalism which it brings on itself.

Note 8: The discussion of organic composition of capital, cheapening
of constant capital, etc, has emerged from this century almost
completely upside-down. The following money relation, we have shown,
must necessarily hold:

$-- = $I (5)

This relation is an invariant or constant of motion. It is a 'law of
motion' in the normal scientific sense (a sense which economics
persistently ignores). It does not *predict* any particular prices and
quantities any more than the law of gravity predicts where I will be on
Tuesday at 3. I am however subject to the law of gravity *wherever* I
am. Capitalism is subject to the law above, deduced only from the
simple fact that all goods exchange for money, whatever these goods are
sold for, and however much of them are sold.

The question is therefore not whether but *how* this is true: how does
capitalist accumulation force the capitalists, whatever the 'technical'
possibilities, to comply with this iron constraint which a money,
market economy, imposes upon them?

All that remains to be settled is whether this invariant money relation
correctly reflects the underlying value relations. Question 2 can
therefore be rephrased thus:

Question 2, restated

Since *money* clearly obeys relations (3), (4) and (5) above, and since
money is merely the expression of value (value-form), what good reason is
there to suppose that *value* does not obey relations (3), (4) and (5)
above? And if it does not, how should these relations be modified so
that they apply to value? What justifies such modifications to an
empirically valid, theoretically rigorous, textually coherent, fully
general and above all *simpler* account?

Note 9: Marx approached this question via the concept of relative surplus
value, that is, reproduction combined with technical change. It is a
disastrous tragedy that he never completed Volume II, which would
have brought together these aspects of his study; had he done so, I
am convinced he would have shown how technical change must take
place consistent with the above law, a general law of capitalist
accumulation; crisis being the means by which the contradictions of
this law are forcibly (and wastefully) imposed by the market.

Note 10: At least one part of the mechanism is the subject of present
discussion: the actual rate of profit is determined by the money-expression
of the capital stock, in turn given by what capitalists actually, historically
pay for their capital. Why on earth not treat this simple, money fact on the
same basis as all other money facts and say that the money-price of the
elements of capital stock, just like the money-price of both variable
and constant capital in general, represents the *value* of this stock
when it functions as a component of capital?

To directly address Fred and Bruce: why should *all* *other* money
sums represent magnitudes of value, *except* the money price of
capital stock? By extending your own insights into the valuation of
flows of constant capital, by merely acknowledging that the value of
stock, like all other value magnitudes, is directly represented, as
a constituent element of production, by its price, you can retrieve:

Marx's value theory
Marx's logical method
an accurate account of reality
devastating simplicity

and you lose nothing.

By denying it you have to make a *specific exception* of capital
stock which does enormous damage to the rest of Marx's project.

To address OPE as a whole: this argument 'extends Marx' as he
himself clearly intended, by integrating his theory of reproduction
with his theory of relative surplus value in a fully logical and
coherent manner. Why not Just Do It?

Like the man says, you have nothing to lose...


PS: I'm happy for this to be made available on any more open list
and indeed, can I file a request that when the occasion arises, it
be so placed.