[OPE-L:2205] Re: Kliman-McGlone interpretation

Duncan K Foley (dkf2@columbia.edu)
Tue, 14 May 1996 06:07:12 -0700

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On Mon, 13 May 1996, Fred Moseley wrote:

(among other things)
> 2. 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.

The "new solution" (or "new interpretation") was concerned to defend the
real role of value calculations and in particular the theory of surplus
value in analyzing the actual motions of real capitalist systems. Thus we
focused on the value added (v+s) aspect of the problem, and proposed an
interpretation of the "value of labor-power" (as the money wage multiplied
by the value of money defined as the ratio of total labor time to value
added) that retained the conservation of value added across price regimes,
and also conserved surplus value across price regimes. (While this works
under the assumption of equalized profit rates, it doesn't require
equalized profit rates: it works whatever assumption one makes about
price determination.) We didn't pay much attention to constant capital,
largely on the grounds, understood, I think, by Smith and Marx, that
measures of constant capital are inherently sensitive to the
reorganization of firms (as I pointed out a while back in a reply to
Alan). In my own work on the circuit of capital, I use money
accounting measures of constant capital.

As Fred and others have pointed out here and elsewhere, the "new
interpretation" carries with it the implication that workers may
experience "unequal exchange", that is a deviation of the money value of
their consumption from its embodied labor content under general conditions
where price ratios deviate from embodied labor coefficient ratios. The
same is true for constant capital: the money value of constant capital
multiplied by the value of money yields a living labor-time equivalent
measure of constant capital which may not equal the labor-time actually
historically embodied in constant capital or the labor-time required to
reproduce the stock of constant capital at current technology.

It seems to me that the focus on "simultaneism" is leading us away from
the more interesting scientific questions. Given the information available
in national income accounts and input-output tables, it is possible to
calculate macroeconomic aggregates like the value added, wage bill,
surplus value, and constant capital in at least 3 ways: at current market
prices (as the NIA in practice do); at "prices of production" derived from
the input-output tables; or at "embodied labor coefficients" (often called
somewhat confusingly "labor values") also derived from the i/o tables. The
interesting scientific question seems to be what each of these are good
for in terms of explanation and understanding the structure of capitalist

I lean, because of my interest in money and short-term macroeconomic
stability, to current market prices for many applications, since those
prices are what people actually see and the money incomes derived from
them are what they actually pursue. (A kind of materialism, if you will.)
But there are other interesting questions about long-term regularities of
the structure of production which may be more clearly understood in other
accounting schemes. (I take the work of Anou, Paul C. and Allin C., and
others showing the structural similarity of market prices to embodied
labor coefficients as being a clue in this direction.)