[OPE-L:3708] Re: Two "causes" of deviation?

Paul Cockshott (wpc@cs.strath.ac.uk)
Tue, 26 Nov 1996 05:37:30 -0800 (PST)

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This is a reply to some parts of Ramos' very long
and detailed posting 3705.
I will concentrate on his arguments directed at me
in that posting, in particular the argument over
whether social labour time is adequately measured
by prices of production.

I intend to show, using the data provided in his
own tables, that production prices can be

It involves the production of a fairly detailed
analysis of his tables which may be a bit
tedious for the average reader.

I would first like to comment on Table A reproduced
>Table A: Single-table transformation procedure
> C V k SV PR PP VA De
>1. 170 30 200 30 40 240 230 +10
> a 80 20 100 20 20 120 120 0
> b 90 10 100 10 20 120 110 +10
>2. 70 30 100 30 20 120 130 -10
>Tot 240 60 300 60 60 360 360 0
In this it is assumed that department 1 produces iron
and department 2 produces wheat. You also have two
firms in department 1 producing iron under different conditions
of production. As such the table is under specified
if it is assumed that both are producing the same physical
product. To ensure consistency you must quantify the
amount of the physical product produced. In general, if
you have two different technical production processes, one
more capital intensive than the other, you would expect
the physical productivity of the more capital intensive
firm to be higher.

Under the assumptions Marx makes about the use of machinery
in Vol 1, one would think that firm b, which uses more than twice
as much machinery per worker would be producing goods more cheaply
than firm a, so that if firm a produced 100 tons of iron, firm b
would produce 100+x tons of iron. Were this the case, firm
b would not earn the same rate of profit as firm a.

Among different firms in the same industry there is no reason
to expect that the mechanism for the formation of an equal
rate of profit, hypothesised by Marx in Vol 3 would operate.
One would expect, on the contrary for firms with different
technologies to earn different profit rates.

You are of course at liberty to select a pair of physical
productivities for firms a and b such that they can both
just make equal profits under the conditions you have chosen.
If you enter a new column as follows.

Table A': modified to include physical product
C V k tons SV PR PP p/t VA De
1. 170 30 200 200 30 40 240 1.2 230 +10
a 80 20 100 100 20 20 120 1.2 120 0
b 90 10 100 100 10 20 120 1.2 110 +10

2. 70 30 100 500 30 20 120 0.24 130 -10
Tot 240 60 300 .... 60 60 360 ... 360 0
tons 200i 250w 250w 250w

In this, we have so chosen the physical productivities to
allow both firms to be able to produce for the same price.

However this is an unstable equilibrium. If there is a random
fall in the price of iron then firm b would become the cheaper
producer. Suppose that for a short while the price of iron
fell to 1.18. Firm a uses 66.66 tons of iron, firm b uses 75 tons.
After the price fall Firm a will have a cost of production
of 66.66 x 1.18 + 20 = 98.67 and firm b a cost of production
of 75 x 1.18 + 10 = 98.5 and as a result, firm b will be
able to undercut firm a and gain market share.
Would a redistribution of labour so that firm b was the sole
producer of iron result in a higher physical and surplus

To see if this would be true let us assume that
the wage in table A is 1 unit of money per person per period.
This means that we have a total labour force of 60 people.
The exact assumption about the wage is arbitrary, it is just
a way of estimating the labour force.

It is possible then to re-organise production so that,

Table C: after competition has operated Assuming only firm b
in production
iron c L v k phys val /
used (value) value prod ton
firm b 197.0 78.78 26.3 11.7 262.6 262.6 0.40
farming 65.6 26.24 33.7 15.0 112.5 562.3 0.11
total 262.6 105.02 60.0 26.7 375.1

val s profit price p/k
prod value money
firm b 105.0 14.6 52.5 1.20 0.20
framing 60.0 18.7 22.5 0.24 0.20
total 33.3 75.0 0.20

wheat wage 4.167
value wage 0.444
totcap 375.1
money wage 1.0
wheat profit 312.3
s/v 1.3

Table C was derived from table A' by assuming that firm b's
technique of production became general, and then using a spreadsheet,
manually adjusting the division of the labour force between the
two departments until the system came into (approximate) physical
balance. The prices of wheat was held constant, all other figures
relating to prices, profits etc were derived by iteration. Since
you gave no money commodity in your example, fixing one of
the prices is necessary.

Note that total profits have now gone up from 60 to 75 in money.

If on the other hand we had assumed that only firm a was in operation
then we would find the result presented in Table D.

Table D: assuming only firm a in production of iron
iron c L v k phys val /
used (value) value prod ton
firm a 107.5 64.35 32.3 17.5 161.2 161.4 0.60
farming 53.9 32.29 27.7 15.0 92.4 462.2 0.13
total 161.4 96.63 60.0 32.5 253.5

val s profit price p/k
prod value money
firm a 96.6 14.81 32.4 1.2 0.2
famring 60.0 12.73 18.5 0.2 0.2
total 27.53 50.9 0.2

wheat profit 212.2
s/v 0.848138683
wheat wage 4.167
value wage 0.541
totcap 253.5
money wage 1.0

Under these circumstances the money profits are down to
50.9, and the rate of surplus value has also fallen.

That the initial situation is unstable, is immediately
visible from value analysis, even though, from a price
analysis one can not see it.

Your version of table A showed that iron was selling at
above its value, and that thus the social labour time
required to produce iron by method b was less than
that required to produce it by method a. Thus a shift
in resources from firm a to firm b would result in
a higher rate of surplus value and a higher mass of
profit. I think that this is relevant to your point:

>So, referring to Paul (3678, second point) I would wish to
>say that IN CAPITALIST SOCIETY what is socially needed to
>produce iron (on account of the inputs) is what the
>INDIVIDUAL CAPITALIST must advance in money terms to
>produce iron. The model representing such society cannot
>neglect the INDIVIDUAL mediation given by the CENTRAL fact
>that capitalism is a system of private, individual property
>and, in particular, a money-organized economy.
>The amount of money corresponding to production price is
>certainly the representation of an amount of labor time.
>Frankly, regarding Paul's point, I find very difficult to
>conceive the category of "production price" depicted as a
>"noisy channel". (This reminds me a Microeconomics texbook
>and does not suggest me a reading of Marx.) Production price
>is not a "noisy channel" but a necessary form of value.
>Production price does not presents "misleading information",
>but the only information available under the constraints of
>capitalist system (e.g. individual private property, money,
>general rate of profit). In any case, Marx shows how what
>Paul considers "misleading information" (the "distorsions"
>(?) between value and price) is annulated for social

You say that production prices do not represent misleading
information, but I have just demonstrated that in your
very own example they do. So long as the analysis was presented
in terms of production prices, it was not evident that
firm a was less socially efficient than firm b. Value
analysis immediately brings this out.

Prices are a misleading indicator in your example, because they
mask a waste of social labour time. A redistribution of
social labour time between firms results in a higher physical
product, a higher mass of surplus value and a higher mass of

Although it is not immediately visible to the individual
capitalist, the laws of competition force the economy of
social labour time to the fore. It is through competition
that the law of value regulates the allocation of social
labour time. The fact that this is not visible immediately
( short of constructing detailed i/o tables ), does not
stop values being the attractor for prices.

Marx could not talk in terms of attractors or noisey channels,
as these are references drawn from complex dynamics and
information theory, which had not been developed in his day.
To the extent that the microeconomics textbooks my language
reminds you of, were written in latter part of this century,
they were influenced by the general language of contemporary
science. I see no reason why Marxists should close their
eyes to developments in knowlege since Marx's death. If we
can stand on the shoulders of giants like Shannon all to the

Paul Cockshott