[OPE-L:5081] Re: production and realization

Ajit Sinha (ecas@cc.newcastle.edu.au)
Tue, 20 May 1997 03:18:59 -0700 (PDT)

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At 09:29 AM 5/16/97 -0700, Andrew Kliman wrote:
>A response to Ajit's ope-l 5035.

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

Once you admit that it is "arbitrary", the game is over. My point is that
the relation of labor-value to money is a theoretical question. The
fundamental debate related to the transformation problem is about this
question. You cannot posit an arbitrary relation between labor-value and
money, and then proceed to"solve" the transformation problem. The whole
exercise becomes meaningless.

The point about more than one prices for the same commodity was to bring out
the abstract nature of all price theories. Your transformation problem paper
is supposedly an interpretation of marx's theory of prices. These prices
that come out as a result are necessarily one price for one commodity. You
cannot have two or more prices for the same commodity in your result, can
you? And that's the point I was making. Moreover, you should also try to
think about the problem I raised a long time ago. You cannot have a theory
of prices which is determined by prices, as your interpretation of Marx
does. These criticisms are not rhetoric. If you are serious about theories
of value and prices then you should give a serious thought to my criticisms.
>Ajit makes another objection: "Let's suppose $1 [of fiat money] buys 1x and
>could also buy 2y."
>Ajit: "So in your case, the value of 1x = 1 labor-hour, as well as the value
>of 2y = 1 labor-hour."
>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.

I'm not disagreeing with Marx. It seems you haven't understood what Marx is
talking about. First of all you have to keep in mind that Marx in the first
two volumes of capital assumes that value ratios represent price ratios on
the average. The assumption he drops in the third volume of *Capital* which
is the beginning of the transformation problem. Now, in the above quote he
puts forward two commodities, wheat and gold,where gold is the commodity
money. Both these commodities in the given proportions have equal values
because they require same amount of labor-time to reproduce them (which is
also my definition of value). Given this, this is also a price ratio since
gold is the money commodity (and, of course, on the assumption that exchange
ratios are equal to value ratios on the average). Then he goes on to say
that at any particular moment because of certain circumstances resulting in
excess demand or excess supply, the money price of wheat could rise or fall
from the value ratios given above. That is, his prices are the gravitational
points around which the market prices fluctuate. As he goes on to add, which
you purposely didn't quote "This is not a defect, but, on the contrary, it
makes this form the adequate one for a mode of production whose laws can
only assert themselves as blindly operating averages between constant

Now, my point or Ricardo's labor theory of value has nothing to do with the
excess demand or supply situations. We are talking about that average, the
gravitational point. So you haven't produced a shred of an argument to
refute my claim that assuming $1 = 1 hour of labor amounts to assuming that
Ricardo's labor theory of value holds.

Cheers, ajit sinha