[OPE-L:3146] TSS and value added

Fred Moseley (fmoseley@laneta.apc.org)
Thu, 26 Sep 1996 13:00:24 -0700 (PDT)

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It seems to me that Andrew's (3097) does not respond to Duncan's main point
(main criticism of TSS) in his (3074). As I understand it, Duncan's main
point was that the TSS interpretation implies that the value added component
of the price of commodities is affected by a mere change in the price of
material inputs, independent of the amount of living labor, which
contradicts Marx's labor theory
of value. Duncan reiterated this point in (3128)

The point is that the revaluation of inventories due to price changes
during the accounting (or production) period is not part of the value
added to the inputs by production itself (or as Marx would say, by
the expenditure of living labor), so it shouldn't be counted in
the value added.

This implication of the TSS interpretation can be clearly seen in terms of
the following price equation:

P = C + VA

where all the variables in this equation are defined in units of money, with
a constant value of money. According to the TSS interpretation,
technological change during a given production period which reduces the
price of material inputs (along with a constant amount of living labor) will
reduce P (which is determined by current costs), but does not affect C
(which is determined by historical costs). Hence, VA (and consequently
profits) must decline; i.e. VA is affected by the change in the price of
material inputs without a change in the amount of living labor.

In the standard "current cost" interpretation, on the other hand, the change
in the price of material inputs changes C by an equal amount and leaves V

Andrew's arguments in (3097) regarding the "two types of inflation" and of
what is and what is not a "purely financial effect" does not address this
essential logic. If P declines and C remains the same, then VA must also
decline, even though the amount of living labor has not declined. Duncan
assumes along with Andrew a constant value of money - or a constant monetary
expression of labor. The "purely financial effect" in Duncan's logic is not
an inflationary effect in either of Andrew's two senses, but is instead the
effect of a change in the price of material inputs on value added,
independent of changes in living labor.