[OPE-L:5164] Re: RRI and The Rate of Profit

Duncan K. Foley (dkf2@columbia.edu)
Mon, 2 Jun 1997 13:35:29 -0700 (PDT)

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Some comments on Andrew's OPE-L:5045:


>The important theoretical question, however, concerns the determination of
>value. Duncan seems to endorse the "replacement cost" interpretation of
>transferred. Yet to sustain that interpretation, one needs to defend it on
>textual grounds, which Duncan has not yet done.
>During the history of this
>list, I and others have put forth a good deal of evidence that disconfirms
>that interpretation, which has not been responded to adequately, and not at
>all by Duncan.

I thought Fred did a pretty good job. Isn't the issue of replacement cost
quite prominent right in the first chapter of Volume I?

>Let me just indicate a few pieces of the evidence, and ask for
>Duncan's response.
>(1) Assume that workers harvest some wild corn, having no value, plant it,
>and harvest new corn. The new corn has value, due to the value added by the
>living labor. According to the replacement cost interpretation, then, a
>positive amount of value is "preserved" and "transferred" from the wild corn
>to the new corn.

If wild corn is a free good, then I don't think it would play a role in the
pricing of the new corn, any more than the air would have in pricing the
output of a steam-powered mill.

>How do you reconcile this with the following from Capital
>I, p. 314 of the Vintage ed. (emphasis added):
>"Its value is determined not by the labour process into which it [a means of
>production] enters as a means of production, but by that out of which it has
>issued as a product. In the labour process it serves only as a use-value, a
>thing with useful properties, and cannot therefore transfer any value to the
>product unless it posessed value BEFORE its entry into the process"?

I don't see the difficulty. Since the wild corn did not have any value (on
the assumption that it's a free good) it wouldn't transfer any value to the

>(2) The replacement cost interpretation implies that the rate of profit (in
>production) obtained in production of luxury goods has no influence on the
>general rate of profit, as Bortkiewicz demonstrated. Yet Marx held that the
>opposite. How do you reconcile his conclusion with the replacement cost

Actually, this is one point where the New Interpretation differs from
Bortkiewicz. Since we define the monetary expression of labor time in terms
of the value added in the whole mass of commodities, that includes luxury

>(3) Torrens had written: "The farmer ... expends one hundred quarters of
>corn in cultivating his fields, and obtains in return one hundred and twenty
>quarters. In this case, twenty quarters, being the excess of produce above
>expenditure, constitutes the farmer's profit ..." Marx objected that
>"*profit* ... is applicable solely to exchange-value,"

Thereby trying to illuminate the point that profit, as a value category, is
not coextensive with the physical surplus in production.

>and that "As far as
>exchange-value is concerned, there is no need to explain further that the
>value of 90 quarters of corn can be equal to (or greater than) the value of
>100 quarters, that the value of 100 quarters can be greater than that of 120
>quarters, and that of 100 quarters greater than that of 500" TSV, 3, p. 77,
>pp. 78-79.

I haven't looked this up in context, but as written it seems incoherent. It
seems to need some stipulation about the time at which the comparisons are
being made. In the Torrens example the production period intervenes.

> How do you reconcile Marx's response with the replacement cost

Since the quote isn't very clear to me, I don't see necessarily that it's
in conflict with the replacement cost interpretation.

In fairness both to ourselves and Marx we ought to acknowledge that while
he certainly understood the issue of changing prices and values due to
technical change, he never systematically analyzed it, and that it is
inherently a rather sophisticated issue. I think the best discussions of it
actually occur in the national income accounting literature, which seems,
in fact, to have been significantly influenced by Marxist and classical


Duncan K. Foley
Department of Economics
Barnard College
New York, NY 10027
fax: (212)-854-8947
e-mail: dkf2@columbia.edu