# [OPE-L:2004] Re: Transforming the Transformation

John R. Ernst (ernst@pipeline.com)
Sat, 27 Apr 1996 16:34:58 -0700

[ show plain text ]

Simon,

Ok. I agree it is "my turn." I think it might be useful
to append my remarks to your last post.

>Simon writes:
>
>I don't understand the specification. Why should anything different happen

>
>in Period II if the uniform rate of profit does not change?
>
>
>John responds:
>The relation between total price and total value changes since the
>labor added in the production process of period II creates less or
>more value than average since it is working with a capital of a
>larger or smaller composition respectively. Living labor does not
>add the same amount of value expressed in prices as before.

>Paul C now replies
>------------------
>The amount of value created by labour is quite independent of the
>organic composition of the capital with which it works. The
>price of production hypothesis is that goods produced under high
>c/v ratios sell at prices above their values, not that their
>values are higher.
>
>
>
>John says:
>
>I am starting with prices of production. How did I get there?
>Start with the concrete and abstract from all else till you get
>there. Now what do we have?

Well, I doubt that concretely one would have equilibrium prices and a
uniform rate of profit.

John continues:

>Now what do we have? Workers laboring for various
>capitals of differing compositions each of which is earning the
>same rate of profit is the object before us. Based on the
>price of the net product of the total labor, we can say what
>amount of "value" is created in the given period of production.
>For that period, we could then say that the "value" added
>represents so many hours of labor.

Yes, I agree with this (as long as we can sort out productive from
unproductive hours of labour. Let's assume all labour is productive, so
that
that hare does not run for the moment).

We could also go further. For in a Dumenil-Foley framework, we immediately
have the value of money (labour hours divided by the money value of net
output.

We could then go further still. For, provided that you accept the argument
that the value of labour-power per hour of labour hired is the product of
the value of money and the average hourly wage rate, (I posted this
argument
ages ago - I've forgotten the number), then we have determined the VLP (per

hour of labour hired). And this imeediately gives us the rate of
surplus-value ((1-VLP) over VLP). (Although we do have to assume that
labour
hours hired and labour hours worked are the same.)

Back to John:

>For that period, we could then say that the "value" added
>represents so many hours of labor. From that number we could
>establish the "value" of the capital inputs.

This is now more complicated. What you can determine about 'living labour'

is a quite different matter. Here is one way we could proceed.

We could calculate the percentage deviation of prices of production from
labour-values-evaluated-at-the-prevailing-value-of-money for any commodity,

by calculating the difference between the vertically integrated capital to
paid labour ratio for the commodity in question from that ratio for the
economy as a whole (both ratios in price terms), and multiplying that
difference by the product of the aggregate wage share in net output and
the
rate of profit. This would give us a precise measure of unequal exchange.
(Actually, I have a short paper on this, written 18 months ago and
gathering
dust because I don't know what to do with it.)

So let's recapitulate what we know and can calculate:
1. Prices of production and the uniform rate of profit. Hence the price
aggregate of net output.
2. Total labour hours worked; hence the value of money.
3. The average hourly wage rate; hence the VLP per hour of labour worked;
hence the rate of surplus-value.
4. Aggregate variable capital and aggregate surplus-value.
5. Measures of unequal exchange, in the sense outlined above.
6. Hence the individual labour values in money terms of the means of
production, and given the prevailing value of money, the labour values
themselves. (But I don't see why one would ever want this information.)

This completes how I see the derivation of values from prices of
production.
What else do we want to know and why?

John concluded:

>My point in the exchanges with Simon and Chai-on was that the
>relative sizes of the various capitals involved seemed to
>affect the determination of "value." Hence, to know the "value"
>added by a given amount of labor, one would have to have already
>abstracted from a certain price of production structure. But here
>I see no other way of proceeding if we take seriously the idea that
>the movement from the concrete to the abstract takes place prior to
>that the presentation in CAPITAL.

Simon concludes:

I can interpret this such that I agree with it. I don't know if that helps.

To know my values up to point 4 above requires knowledge of the all price
data plus labour hours worked. To know my values in point 6 requires the A
matrix and the Leontief inverse, and the values so determined are dependent

on the value of money.

John responds:

Let me grant you, for the sake of argument, the six things we
can calculate. My original point concerned the differences that
can occur as we move from one period to the next. I added the
assumptions that

1. in the first period there was enough output for accumulation
to take place in the next period.

2. one of the sectors are departments not of average composition
grew at a faster or slower rate than the others.

3. there was no technical change from one period to the next.

Based on these assumptions I stated that we would, in Period II,
calculate a different "value of money." Thus, the value of
money could change without any technical change at all. For me,
this calls into question the manner in which this "value" was
determined. That is, if it is a one-time calculation, what is
the difference? You could simply use it to "see" values via the
prices of production. You'd be dealing with prices and values
the way Marx does in Vol. I when he states that the more productive
labor is capable of producing more value when the forces of
competition do not force prices down on the world market. In our
example, we would simply say that the labor in the "odd" sector is
producing more or less value than the others and go on with the
analysis. What do we lose?

Well, there goes any hope of actually deriving prices from values.
But, the alternative is to perpetually compute the value of money
since the value so computed is only valid for a point in time
and hence can never be part of comprehensive picture of an
accumulation process taking place in real time. Toss in technical
change and fixed capital and the thing becomes a mess we've yet
to capture with any mathematical techniques.

Thus, if nothing else, we could go beyond Chap IX of Vol. III and
treat prices of production as values recalling Marx's instruction
to remember the possible difference between the two magnitudes when
it comes to a given amount of output.