[OPE-L:5217] Re: Stocks in circulating capital model

Duncan K. Foley (dkf2@columbia.edu)
Sun, 8 Jun 1997 16:16:11 -0700 (PDT)

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In reply to Andrew's OPE-L:5212:
>(Andrew) had written: "I do not think that it is possible to reconcile
>the two sets
>of figures, or to discount the latter, by referring to the revaluation of
>inventories or stocks. In this example, the 4 bu. of seed-corn no longer
>exist as commodities once they are planted, so there are no unused stocks to
>revalue at the end of the year."
>Duncan replied: "One or another version of this claim about the nonexistence
>of stocks in circulating capital models has turned up in several TSS examples
>and comments, but I think it's incorrect. The seed in the ground is analogous
>to an inventory of commodities in the process of production, which generates
>an entry on the asset side of the balance sheet. Whenever there's
>a real time lag in the production process, there is a stock of goods in
>process that can be revalued."

>Before one can value an asset, it has to exist, it has to have a use-value
>Jerry has recently reminded us). How can you say that the seed-corn exists
>physically once it has been planted? Where is it? Could you dig up the
>ground and find it.

The field with the seed corn planted and growing in it is a different
commodity and more valuable than the same field unplanted at the same time
of year. Adjustments of this kind are made all the time at real estate
closings, analogous to the adjustment usually made in houses for the amount
of oil in the oil tanks.

>Or imagine that goods are hauled by truck from New York to California. This
>adds value to the goods. In the process, gasoline is used up, destroyed,
>productively consumed. So much is used up that the driver must stop several
>times along the road and refuel. How can you call the used-up gasoline a
>still-existing stock? Where is it? For what price could the trucking firm
>re-sell the burnt-up gasoline?

Again, the goods moved to Indianopolis are worth more than they were in New
York, though less than they would be in L.A. So the value of the gasoline
(not, obviously, the gasoline itself) is a still-existing asset on the
balance sheet of the company.

>(In any case, the valuation of assets is irrelevant. The basic simultaneist
>error is to confuse the sum of value invested with the valuation of the
>material components acquired by means of that investment. *This* is why Marx
>says that the constancy of constant capital -- the mere re-appearance of the
>*capital advanced* for means of production -- "by no means excludes the
>possibility of a change of value in its elements." He uses the word
>"elements" here and elsewhere to refer to the material components acquired.
>In other words, though the *constant capital*, the sum of value laid out on
>means of production, is necessarily constant, the value of the material
>elements can change. The constancy of the constant capital does not exclude
>the possibility of a revaluation of means of production BECAUSE THE VALUE OF
>the sum of value advanced for means of production.)

I find the distinction between the value of the stock and the value of its
"elements" difficult to follow. As far as I can see, this comes back again
to a restatement of the fundamental disagreement about the accounting

>This is all closely related to the ideological notion of "net product." As I
>wrote in ope-l 4468:
>"Because all new value comes from living labor, the simultaneists look for a
>physical counterpart to this, in which living labor produces the new product
>('net product') and, apparently, the means of production are merely preserved
>and transferred to the product. So we see once again the characteristic
>simultaneist move of establishing a one-to-one relationship between value and
>use-value. For instance, see _Understanding Capital_, p. 13: 'Every
>commodity contains a certain amount of value, and the mass of all commodities
>*newly produced* in a society in a period of time also contains a certain
>value, the aggregate *value added* of all the *newly produced* commodities.'
>[middle emphasis in original]
>[See also pp. 20-21: "The whole mass of NEWLY PRODUCED commodities contains
>the whole expenditure of social labor in a particular period of time, and
>value [BTW, what value?] expresses itself as the money value added of the
>of commodities."]

If I were to rewrite this today, I would try to be more precise. As the
quotes I put in my last post from Marx make clear, and as I agree, the
living labor does produce the whole use value of the total product: but in
exchange value terms it only produces the value added. I'm a little
troubled by the suggestion that I'm not sensitive to the distinction
between the total product and the net product, or to the importance of
constant capital, since I spent a lot of time in _Understanding Capital_
and my 1982 JET paper on the analysis of the circuit of capital, which
depends crucially on the role of constant capital.


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