[OPE-L:2531] Re: theory of surplus-value and individual prices

Paul Cockshott (wpc@cs.strath.ac.uk)
Tue, 18 Jun 1996 03:04:38 -0700 (PDT)

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Fred writes:
>1. According to my interpretation, relative prices are even less important
>in Marx's theory than are prices of production. Price of production is the
>total price of all goods produced in a given industry. This is the price
>variable that is determined in Marx's theory of prices of production in Part
>2 of Volume 3 as the means of explaining how rates of profit are equalized
>across industries. From this total price of an industry's output, one could
>derive per unit prices and per unit relative prices (by assuming a given
>quantity of output). However, these individual unit prices play no role in
>Marx's theory. They are not determined in Volume 1 or in Volume 3.
>Therefore, my prior argument that Marx's theory of surplus-value in Volume 1
>does not depend on prices of production applies even more to relative unit
>2. I agree that Marx's theory of surplus-value in Volume 1 depends on a
>"labor value price theory," but I argue that this labor value price theory
>in an AGGREGATE price theory, not a theory of individual or relative prices.
>In my last post and in other posts, I have argued that such an aggregate
>labor value price theory is at least logically possible and can provide the
>basis for an aggregate "surplus labor theory of surplus-value." Marx's
>analysis of absolute surplus-value (conflict over the length of the working
>day and over the intensity of labor) and relative surplus-value
>(technological change) follow as logical deductions from this aggregate
>theory of surplus-value, as Duncan has already argued.

Paul C:
What I am arguing is that any price theory is by definition a relative price
theory, since prices are a development of exchange values, and the latter
are inherently a relationship between commodities.

The analysis of surplus value in volume 1 of capital depends upon the price
of the product exceeding the sum of the wages and the means of production
consumed. It depends upon the relative price of the product being
greater than the composite constant capital commodity. (It actually is more
specific than this, it specifies an absolute increase in the value
of the constant capital, not just a relative increase. The formula is
p=c+l not p=Xc).

For this relation to hold, there must be a close correlation between the
price of the product and its labour content.

It is true that the c which enters into the factory is a composite of
several different commodities - cotton, coal, sizing, mules etc in
Marx's examples, and as such is an aggregate commodity. But each of the
commodities that form the aggregate is itself either the product of
the labour of an independent labourer working under non-capitalist conditions,
or, the product of a similar production process. As a result the
individual commodities that make up the aggregate must themselves be
subject to the law of value, their price must be governed by the labour
required directly or indirectly to produce them.

Given that surplus value represents a fairly considerable portion of the
value of the final product on average, the theory is sufficiently robust
to allow a certain amount of noise. One can formulate it as p=c+ Bl
where B is a random variable with mean 1 and a skewed distribution going
from about 0.5 at the lower margin to perhaps 3 at the upper margin.
That is to say, the theory does not demand exact proportionality
between prices and added labour, only a strong correlation.
But, given that wages are typically of the order of 500f value added,
the theory becomes untenable if the distribution of the random variable
B is radically different. If B had a Gaussian distribution with mean 1
and standard deviation of 2, then it would imply that a large portion
of all commodities were regularly sold at a loss.

For any interpretation of Marx that you make to be consistent with
the fact that only a small proportion of commodities are sold at a loss,
you have to assume that the distribution of prices around values is
reasonably tight.

>Paul added at the end of (2523):
> I am not greatly concerned with production price theory, which I regard
> as at most a minor second order perturbation, and at worst a snare and a
> delusion.
>These are strong words. If working on a theory of prices of production is a
>delusion, then Marx certainly shared this delusion. I argued in a post
>yesterday that one of Marx's main criticisms of Ricardo was the latter's
>failure to provide a theory of prices of production and that Marx considered
>such a theory of prices of production to be important and necessary for at
>least the following three reasons: (1) to refute the criticisms of Malthus,
>Torrens, etc, that the labor theory of value is contradicted by equal rates
>of profit, which had been one the main justifications for rejecting the
>labor theory of value by the classical economists;

Paul C:
Yes, Marx certainly shared this delusion, and by his mistake ensnared 4
of socialist political economists in a quagmire.

I am minded to believe that the idea of an equal rate of profit accross
different branches of production, which was certainly the orthodox view
of political economy, was an illusion arising from

1. A poor grasp of statistics in the early 19th century whereby people did
not realise that it is often wrong to substitute, for a random
variable, its mean.

2. A confusion of profit on productive capital with rate of return on
financial assets such as shares which does have a relatively narrow

It would, in retrospect, have been better to have said that Malthus and
Torrens were simply wrong, that they were confusing dividend rates and
interest rates with profit rates.

>I would argue that a theory of prices of production is still important and
>necessary today for pretty much the same reasons. The apparent
>contradiction between the labor theory of value and equal rates of profit
>continues to be one of the most frequent criticisms of Marx's theory,
>especially within the economics profession. Therefore, it is still
>important today to respond to these criticisms and to provide a theoretical
>defense of the labor theory of value on this important point.
Paul C:
I agree that this is important, but why accept uncritically the assertions
of the bourgeois economists that there is an equal rate of profit?
Why conceed anything to them?

Paul Cockshott