# [OPE-L:5044] Re: production and realization

andrew kliman (Andrew_Kliman@msn.com)
Fri, 16 May 1997 09:29:40 -0700 (PDT)

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A response to Ajit's ope-l 5035.

I find his post to be tangential to the points I was addressing; it does not
respond to them. I should also mention that I would still be interested in
Ajit's response to my ope-l 4919.

Ajit objects to the assumption that \$1 = 1 labor-hour. First, because it is
arbitrary.

Yes, it is arbitrary. But the numbers do not matter. Let me assume instead
that, at the moment inputs are acquired, \$1 = z labor-hours. Unless one
denies that price is the monetary expression of value, this assumption must be
accepted, since it merely states that, at a given moment, a certain amount of
labor-time is expressed as a certain amount of money.

Then, my example would read:

Imagine, for instance, a two-producer sector, in which A buys 2500 yards of
cloth at a price of \$2 each, and B buys 200 yards of cloth at a price of \$2.27

each. Ignore other inputs and, in order simply to focus on price differences,

imagine that they have the same technology: A extracts, say, 500 labor-hours
and produces 50 widgets, and B extracts 40 labor-hours and produces 4 widgets.

Also imagine that, at the moment inputs are acquired, \$1 = z labor-hours.

Then, measured in labor-time, the individual value of A's total output is
2z*2500 C + 500 V+S = 5000z + 500..
The individual value of B's total output is 2.27z*200 C + 40 V+S = 454z + 40.
The
total social value of widgets is 5454z + 540, the total output is 50+4 =
54, and the social unit value is ( 5454z + 540)/54 = 101z + 10.

For the sector as a whole, still measuring in labor-time, C = 2z*2500 +
2.27z*200 = 5454z, and the C per widget
is 5454z/54 = 101z. This is the sum transferred to the widget, the actual
social COST, i.e., the socially necessary labor-time needed to produce a
widget, net of the value added. So, through production, A transfers and
preserves a value of 101z*50 = 5050z, which is 50z more than A's actual
expenditure (2z*2500). B transfers and preserves a value of 101z*4 = 404z,
which
is 50 less than B's actual expenditure (2.27z*200). So, via intrasectoral
competition, value has been distributed from B to A, with no gain or loss in
the aggregate.

Thus, even though C does not correspond immediately to actual expenditures, it

is an actual cost, not an imaginary amount computed by postulating conditions
contrary to fact, as simultaneist costs are.

The results are exactly the same as before, except for the numbers. But the
numbers don't matter, because this is just an example. The point of the
example is to show that "in my interpretation, C and V refer to actual costs,
not abstract ones. Yet there may be a difference between actual expenditures
and actual
costs, because only socially necessary labor-time counts as value. There is
no presumption, nor any requirement, that a single price prevails." The
second version of the example shows this as well as the first does.

Ajit makes another objection: "Let's suppose \$1 [of fiat money] buys 1x and
could also buy 2y."

OK.

Ajit: "So in your case, the value of 1x = 1 labor-hour, as well as the value
of 2y = 1 labor-hour."

Wrong.

In Marx's theory, "although price, being the exponent of the magnitude of a
commodity's value, is the exponent of its exchange-ratio with money, it does
not follow that the exponent of this exchange-ratio is necessarily the
exponent of the magnitude of the commodity's value. Suppose two equal
quantities of socially necessary labour are respectively represented by [1
unit of y] and [\$1] .... [\$1] is the expression in money of the magnitude of
the value of the [1 unit of y], or its price. If circumstances [!] now allow
this price to be raised to [\$2], or compel it to be reduced to [\$0.50], then
although [\$0.50] and [\$2] may be too small or too large to give proper
expression to the magnitude of [y's] value, they are nevertheless prices of
[the unit of y], for they are, in the first place, the form of its value, i.e.
money, and in the second place, the exponents of its exchange-ratio with
money. If the conditions of production, or the productivity of labour, remain
constant, the same amount of social labour-time must be expended on the
reproduction of a [unit of y], both before and after the change in price. ...
The magnitude of the value of a commodity therefore expresses a necessary
relation to social labour-time which is inherent in the process by which value
is created. With the transformation of the magnitude of value into the price
this necessary relation appears as the exchange-ratio between a single
commodity and the money commodity which exists outside it. [If money is not
immediately a commodity, the relation of course appears as the exchange-ratio
between a single commodity and the currency unit which exists outside it --
AJK.] This relation, however, may express both the magnitude of value of the
commodity and the greater or lesser quantity of money for which it can be sold
under the given circumstances. The possibility, therefore, of a quantitative
incongruity between price and magnitude of value, i.e. the possibility that
the price may diverge from the magnitude of value, is inherent in the
price-form itself." Capital I, Vintage, p. 196.

Ajit continues: "Since \$1 could buy either 1x or 2y, the exchange ratio
between x and y must be 1:2.

I agree with this part.

Ajit: "However, this is also equal to their value ratio. Thus, "imagining" or
assuming \$1 = 1 labour-hour amounts
to ASSUMING that Ricardo's labor theory of value holds!!"

No. See above. You are disagreeing with Marx, not with the validity of my
interpretation of his theory.

Andrew Kliman