[OPE-L:2198] Re: New Solution

S.Mohun (S.Mohun@qmw.ac.uk)
Tue, 14 May 1996 02:51:53 -0700

[ show plain text ]

Fred wrote:
>By way of comparison and partial critique, the "new solution"
>interpretation of
>the transformation problem is similar to the above interpretation in the
>sense that it also assumes that VARIABLE CAPITAL is taken as given as the
>quantity of money-capital used to purchase labor-power, and that in general
>this quantity of money-capital will not be equal to the value of the means
>of subsistence. However, the "new solution" is different from the above
>interpretation in the sense that it assumes, to the contrary, that CONSTANT
>CAPITAL is NOT taken as given as the quantity of money-capital used to
>purchase the means of production, but is instead derived in the Sraffian way
>- from given means of production - and is in general equal to the value of
>the means of production. Thus, there seems to be an important inconsistency
>in the "new solution" between the two different methods used to determine
>constant capital an variable capital. It seems to me that, since both
>constant capital and variable capital are components of the total capital
>invested, these two components should be determined in parallel fashion.
>Either they both should be taken as given as given in money terms, as I
>argue they are in Marx's theory, or they should both be derived from given
>physical quantities, as in the Sraffian interpretation.

Simon replies:
Count me among the ignored/aggrieved/resigned etc. More seriously, I have
posted before (around no. 800 or so) why constant and variable capital
should be treated differently, and Fred doesn't address the point. So I'll
try again.

Consider the sale of the commodity LP for a wage and the use of this wage to
purchase a (historical and moral) subsistence bundle of commodities. There
are 2 transactions: C-M followed by M-C. Marx's ch. 6 is set out under the
assumption of equal or equivalent exchange. So the VLP can be measured
either by the money wage,, given a value of money, or in terms of the
commodities the wage purchases, since these are both equivalents by assumption.

The standard tradition has been to use the commodities the wage purchases,
and to treat this measure as the theory. This can only be right under the
posulated equal exchange assumption..

But when the rate of profit is equalised (tendential, in the long run, or
whatever), we cannot in general have equal exchange: prices of production
are systematically different in general from money-values. That is, in the
second transaction M-C, the value represented by M (the wage at the
prevailing value of money) and the value represented by C (the value of the
commodities which the wage purchases) will in general be different.

There is no other way to measure the VLP; it has to be one or other of these
measures. For there is no 'intrinsic' measure of the VLP since it is
neither a produced commodity in the usual sense, nor does its reproduction
take place under capitalist relations. Hence the forces making for unequal
exchange because of the equalisation of the rate of profit do not apply to
the first transaction C-M whereby people sell their LP for a wage. So there
is no reason not to take the wage as the equivalent of the VLP, given some
value of money. More precisely, the wage is the wage rate, and the VLP is
per hour of labour hired. To convert this to total wages and variable
capital, we need additionally an account of what determines the number of
hours a worker is hired for, and what determines how many workers are hired.

So in general the VLP is measured by the wage rate, given a value of money,
and is not measured by the value of the commodities purchased by the wage.
It is a mistake to take an equal exchange assumption about the determination
of the VLP and apply it in situations in which there is not equal exchange.

We cannot make the same arguments about constant capital. With unequal
exchange, a capital sells some produced commodities for a sum of money which
is in part invested in produced means of production sold by other capitals.
The unequal exchange stipulation applies to both transactions.

Hence there is no reason to treat constant and variable capital in the same
way, and good reason to treat them differently. It is not the case that the
'new solution' is inconsistent - rather the reverse.


Simon Mohun,
Dept of Economics,
Queen Mary and Westfield College,
Mile End Road,
London E1 4NS,
Telephone: 0171-975-5089
Fax: 0181-983-3580