[OPE-L:2160] Re: Depreciation(?);Kliman/McGlone

Allin Cottrell (cottrell@wfu.edu)
Fri, 10 May 1996 19:10:59 -0700

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Some responses to Andrew's last couple of postings. Some of the
questions were addressed to Paul C, but I am sufficiently in
sympathy with Paul's postings to wish to answer.

What's your ("scientific") criterion for the correspondence of a value
theory to Marx's? If the correpondence of the interpretation's
predictions/implications to Marx's isn't at least one important
criterion, why not?

My basic answer here is that textual exegesis is not a science at
par with political economy (such as it is). Andrew always wants to
displace questions dealing with the real economy onto questions of
the interpretation of Marx. That's his privilege, but it should be
clear that when Paul talks of "science" he's talking about
acquisition of knowledge of the economy/society.

Would you at least agree that we have refuted the "proofs" of the
internal inconsistency of Marx's transformation and law of the FRP?
I.e., that under our interpretation, there is no inconsistency?

Tendentious. We in the "opposition" have surely made it clear that
we think the cost of rescuing "Marx's consistency" are too high, BOTH
in terms of detachment from the real, and also detachment from what
we take to be the thrust of Marx's own views.

Why do critics of the TSS interpretation alsways seem to want to change
the subject, rather than discuss the internal (in)consistency issue

We want to "change the subject" to the issue of the analysis of
capitalism and (yes, we're interested in this too) the overall
character of Marx's analysis in Capital. Debating the merits of
a "consistent" theory that is nonetheless hermetically sealed off
from both of the foregoing does not seem very useful.

Allin seems to misunderstand what he calls K-McG's "transformation
algorithm." The only things it "predicts" are a profit rate of s/(c+v),
total value = total price, and total surplus-value = total profit. It
does not predict an equal rate of profit or individual prices in the
current period. Much less does it predict the future course of prices.

Registered. Let us proceed.

Let me call the profit rate on reproduction costs, which Allin,
Paul, Bruce, and others seem to favor, the "real" rate (following
Michele Naples' usage). Allin assumes an equal historical rate of
profit but an unequal real rate and asks who'd I prefer to be, the
firm with the lower or the higher "real" rate? Ceteris paribus, i.e.,
based on this info. alone, I'd be indifferent. Why? Well assume
instead unequal historical rates but the same "real" rate. I'd clearly
prefer to be the one with the higher historical rate, because I could
use the extra surplus-value to expand into *either* business (or
as Allin notes, retire).

Well, OK, if he can move _costlessly_ from any branch of production to
any other, the historical rate of profit is the only one the
capitalist need be concerned with, _ex post_.

This relates to the above, as well as Bruce's ope-l 2126: One thus
sees a glaring contradiction in the simultaneist reasoning, namely the
attempt to talk about capital mobility while adopting as a choice criterion
a profit rate based on the lack of any such mobility. If capitalists are
free to move their capital, the rate that they would obtain were they
to remain stuck in their present industry is meaningless as a measure of
their profitability. (It is, however, of key importance in determining
where to put the capital next.)

Andrew, didn't you just execute a graceful pirouette? Bruce's point
(which I endorse) is just that what you call the "real" rate is the one
that is relevant (because it's forward-looking) to decisions on the
subsequent allocation of capital.

Also on Bruce's post, which also relates to similar points r[ais]ed
by Allin and Paul: Bruce's dynamic scenario seems plausible at first.
The "real" profit rate is higher here than there. Capital enters here,
exits there; price falls here, rises there. The "real" rate tends toward
equality because that's the target. And that's the target because that's
the rate relevant to the future.

I've already discussed why I'd still want the higher historical rate.
But there's another key problem with this story--as presented by Bruce
i[t] seems dynamically unstable...

Wait a minute. This is not a problem with Bruce's account, or with
"simultaneism", it's a real issue: Is there any guarantee that the
standard mechanism of capital flowing into this industry (with
above-average profit) and out of that one (with below-average profit)
will actually produce convergence on a general rate of profit?
The issue has been hashed over by mathematical heavyweights such
as Steedman and Gerard D. I suspect that Gerard (arguing for
convergence) has the upper hand, but it's a non-trivial question.
And it's certainly not grounds for criticism of a theory which makes
some attempt to spell out the dynamics, as opposed to one which
merely _assumes_ an equalized rate every period (while conveniently
disclaiming this as a "prediction").

I agree *completely* that the idea of constructing a theory of prices
based on profit rate equalization is misplaced. I have no intention of
doing so, and I don't think Marx was trying to do so. Ch. 9 of Vol. III
really concerns the limits within which profits and prices can move.
Prices can't rise such that the "price" rate exceedes the "value" rate
of profit.

No quarrel with sentence #1. On sentence #2, though, I suspect that
this _was_ Marx's aim, at least in the relevant sections
of Vol. III. Paul and I think he was wrong in seeking to do so; he
was overly impressed by the classical Smith/Ricardo logic that told
him that profit rates must be equalized.

I want to see critics of the TSS interpretation come
up with some actual models of the tendency of the profit rate, the
determination of aggregate price and profitability of the real world,
not just static solutions and stories about dynamics which never get
developed so that their presumed relation to the static solutions
can be TESTED. Isn't this part of being "scientific"?

I have some criticisms (possibly half-baked) of Paul's "Notes on
Dynamic Value" which he referred to on ope some time ago, and which
he has made available over the Web. But they seem to me to
constitute a far more developed dynamic treatment of the topic than
anything explicitly offered for public consumption here (though I
should say that I'm aware of sophisticated dynamic work on Duncan Foley's
part, which I have not yet fully digested).

Finally, once more, because this too seems to keep getting put out there
and not responded to, only the most myopic capitalist would take
the "real" rate as an objective function. They are concerned, when
they invest, with their rate of return on investment over the whole
future life of the investment. That depends on prices during that whole
span of time. Only the most myopic firm would presume that prices will
remain constant during this whole time.

Which is likely to be the better predictor of the forthcoming rate
of profit, do you think: the historic rate or the "real" rate? Since
the "real" rate incorporates more recent information, the answer
seems pretty obvious. The only way out of this that I can see, is to
say they're equally bad: Anything could happen, who knows? But then
there is no tendency to equalize any measure of profit.

Allin Cottrell.