# [OPE-L:3094] Clarity on IVA

John Ernst (ernst@nyc.pipeline.com)
Mon, 23 Sep 1996 09:58:29 -0700 (PDT)

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Duncan,

and apologize for the unclarity. Let
me see if I can get a handle on what you
refer to as the IVA.

Here, again, is my example in its unclear
state:

Let's say that I buy \$90 worth of the commodity in a
one-commodity world and spending next to nothing on wages
manage to produce \$120 worth of that commodity. The living
labor created a value of \$30. Clearly, with this informa-
tion we would agree that my rate of profit is 33.3%. Of
that \$120, I invest \$100 in constant capital in the next
period and introduce a new technique, which I hope will
increase my profits as well as my profit rate. Despite
my hopes, it doesn't since the price of the commodity
falls after production such that the total price of
the output is \$130. If we in the world of TSS look at
this situation, we see that there is \$100 invested in
constant capital and, as before, \$30 added to the product
by the living labor. For us, the given amount of living
labor is adding the same exchange value to the product in
both periods -- \$30. To be sure, the rate of profit has
now fallen to 30% as the living labor created the \$30 in
exchange value.

_____________________

As I begin producing with my \$90 investment, let's further
assume that 120 units of the commodity are produced. Each
then has a price of \$1. In the next period, having invested
\$100 to buy 100 units of the commodity produced in the
previous period. Let's say that I can now produce 200 units
of the commodity. Thus, I would expect that the gross output
would sell for \$200. It doesn't. As stated above, it sells
for \$130. Why \$130? Here, I think, we see the assumption
of the LTV. That is, I invested \$100 and the living labor adds
\$30. The price of the total is thus, again, \$130. The price
of the individual commodity fell from \$1 in the first period.
to \$130/200 or \$.65 after production in the 2nd.

Here, I think TSS, as I use it in the above, is indeed following
the LTV. If not, I am really unclear on how my example differs
from what you see Andrew doing. You may be seeing something
in Andrew's efforts that I am simply missing.

Striving for clarity,

John